Sales growth miss takes some of the puff out of British American Tobacco

Shares in tobacco giant British American Tobacco dipped after its sales growth came in below investor expectations - SUZANNE PLUNKETT

Lower-than-expected sales growth took some of the puff out of cigarette giant British American Tobacco even as the company made greater inroads into alternative smoking products.

The company, which pulled off the largest tobacco company acquisition in history with its £41.8bn purchase of the rest of US rival Reynolds American it didn’t already own, saw organic sales rise 2.9pc to £15.1bn – a lower rate of expansion than investors had been expected.

While cigarette volumes and tobacco heating products grew thanks to the acquisition, the amount of cigarettes it sold excluding Reynolds dropped 2.6pc to 647bn stick equivalents.

This was better than the broader market’s 3.5pc decline although clearly not enough to satisfy investors who sent the shares down 2.2pc to £43.55.

Finance director Ben Stevens also said the company had warned investors that the recent strengthening of the pound could act as a brake on earnings growth in 2018. The company benefitted greatly from sterling’s weakness in 2017 because the vast majority of its earnings come from overseas and so translated more healthily into pounds.

British American Tobacco share price

In spite of the share price fall, Mr Stevens said the company had produced a “cracking” set of numbers for 2017. On a statutory basis the huge spike in earnings to £29bn from £6.2bn in 2016 was as a result of the Reynolds purchase but excluding this, operating profits rose 3.7pc to £5.6bn.

Mr Stevens also said the company’s gains in the so-called next generation products segment, which includes vapour and heating products, had progressed well.

The company’s tobacco heating product glo now represents just over 4pc of the entire Japanese smoking market. The finance director said glo would be rolled out to 14 other markets this year.