Interim management statement for the three months ended 31 March 2013

A good start to 2013

• Good revenue growth of 5% at constant rates of exchange
• Revenue growth of 1% at current rates of exchange
• Cigarette volumes from subsidiaries decreased by 3.7% to 160 billion, with a decrease of 3.4% for total tobacco volumes
• Global Drive Brand cigarette volumes grew by 1.0%
   

Nicandro Durante, Chief Executive, commented: “This is a good performance against a backdrop of fragile economic conditions persisting in many parts of the world. We have grown revenue, our pricing momentum remains strong and our Global Drive Brands continue to perform well. It is a good start and I remain confident of another year of earnings growth in line with our long term strategic goals.”

SUMMARY OF PERFORMANCE

Trading update

British American Tobacco performed well in the three months to the end of March 2013 with continued growth in revenue and Global Drive Brands. Market share grew strongly in the Group’s Top 40 markets, although volumes were lower than last year as a result of the adverse impact of excise-driven trade inventory movements in Brazil, the leap year comparator and industry volume decline.

Group revenue for the three months, at constant rates of exchange, grew by 5%, driven by a strong pricing environment. At current exchange rates, revenue grew by 1%, as movements in some of the Group’s key trading currencies adversely impacted revenues.

Cigarette volumes from subsidiaries were 160 billion, down 3.7%, with growth in many markets, including Bangladesh, Pakistan and Vietnam, more than offset by lower volumes in Brazil, as a result of trade inventory movements, the leap year comparator and market declines in southern Europe.

The four Global Drive Brands’ cigarette volumes were up by 1%, with their market share growing strongly in the Group’s Top 40 markets. Dunhill volumes increased by 5%, with good growth in Indonesia, the Middle East and South Korea, partially offset by declines in Brazil. Kent was 7% lower, driven by market declines in Russia and Japan. Lucky Strike volumes were down by 9%, with increases in Germany, Poland and Italy, more than offset by market declines in Spain and lower volumes in the Middle East. Pall Mall was up by 9%, largely as a result of growth in Pakistan, Chile, Canada and Italy, partially offset by declines in Uzbekistan and Spain.

Other tobacco products performed well, with Fine Cut tobacco growing strongly, driven by a 9.5% increase in Western Europe. Pall Mall, the biggest Fine Cut brand in Western Europe, was up by 21.2% with growth in Spain, France, Italy and Belgium.

Trading environment

The pricing environment remains strong despite difficult trading conditions in many parts of the world, notably southern Europe. If current exchange rates persist for the rest of the year, the currency headwind that adversely impacted the quarter will reverse.

Cigarette volumes

The segmental analysis of the volumes of subsidiaries was as follows: