British American Tobacco, maker of Dunhill and Lucky Strike, has raised a note of caution this morning about unemployment hitting its sales but posted a sharp rise in 2009 earnings and reported signs the global economy is recovering.
The cigarette maker has recommended a final dividend of 71.6p, which together with the interim dividend, will take 2009 dividends to 99.5p, an rise of 19%. The rise in earnings came as BAT reported a 17% rise in in revenues to £14.2bn.
But the shares were down 2%, or 43.5p, at £21.87.5 in late morning trading after a strong recent run. The wider FTSE 100 was flat at 5343.
Chairman Richard Burrows sounded a note of cautious optimism about the outlook:
"There are signs that the global economy is beginning to improve, although unemployment, which is an important influence on our business, may continue to rise in developed markets. We have a very clear strategy and excellent management, with a well balanced portfolio of brands. Our unrivalled geographic spread mitigates risk for shareholders and will help us maintain sustainable growth and build shareholder value."
Around the world, BAT saw variations in sales, with Russia particularly tough. BAT said tobacco industry declines in both Russia and Japan knocked sales volumes for its Kent brand by 4%. But Dunhill rose by 9% and Lucky Strike volumes were up 4% with growth in Germany, France, Italy and Chile, partially offset by declines in Spain, Japan and Argentina. Pall Mall saw the strongest growth, up 10%.
Analysts were largely positive about the results. Chas Manso de Zuniga at Evolution Securities highlighted that margins were better than expected across geographies barring Western Europe and maintained a "buy" recommendation and £22.50 price target on the shares.
