British American Tobacco volume improves as forex weighs

LONDON (Reuters) - British American Tobacco (BATS.L), the world's No. 2 cigarette maker, posted improved sales volume for the first quarter, though foreign exchange rates were a big drag on revenue.

The maker of Pall Mall and Lucky Strike cigarettes said on Wednesday volume, which measures the amount of tobacco sold, fell 1 percent in the three months ended March 31.

That is an improvement from the 2.7 percent decline the company reported for 2013.

Gains in Asian countries such as Pakistan and Indonesia were more than offset by declines in European markets such as Russia and Poland.

"Emerging market volumes are increasing, however, the trading environment in Western Europe remains challenging," the company said.

As people in many developed countries smoke less, British American and its rivals Philip Morris International (PM.N) and Imperial Tobacco (IMT.L) rely on price increases to keep their revenue and profits growing.

British American said revenue in the first quarter, excluding the impact of currency exchange rates, rose 2 percent, helped by price increases and gains in market share. Yet at current currency rates, revenue fell 12 percent.

Still, the company's chief executive said in a statement he "remains confident of delivering consistent earnings growth" this year, though performance will be more skewed to the second half than in previous years, due to the timing of price increases and foreign exchange impacts.

(Reporting by Martinne Geller; Editing by David Holmes and Mark Potter)