British American Tobacco (BAT) increased its tobacco prices suddenly in the first half of the year and faced an exclusive growth from Japan, supporting it raise profits by 10% despite a drop in sales volumes. The London based manufacturer of Kent, Lucky Strike and Pall Mall cigarettes declared that the price rose of approximately 8% helped to compensate a 1% drop in sales volumes to drive the profit up 7%.

BAT, the second largest tobacco producer, declared its ability to increase prices even in slow growing markets. Corporate Head Nicandro Durante stated that signs of recovery in primary markets, volume decreases and higher pricing place the group on the way to a profitable year. “The given recovery depends on the economies of our markets and for instance in Russia and other primary markets the rate of volume drop is slow,” he said.

Tobacco volumes in the second-quarter demonstrated a 0.2% drop after a decrease of 1.8 % in the first quarter of 2011; a lot of economies all over the world have recovered. BAT’s shares increased up 0.9 % at 28.88 pounds by 3:35 p.m., when the FTSE 100 index decreased by 1.3 %. “We think that this is a very good result achieved by BAT. We see tobacco and BAT in particular, as a powerful defensive refuge,” stated analyst Martin Deboo at Investec Securities.

BAT has faced decreasing volumes as smokers have switched to lower-priced cigarettes, and sometimes illegal tobacco products following excise duties increases and high unemployment rate, but the underlying volumes picture has started to ameliorate.

In Japan the group faced an exclusive gain from the destruction to production by domestic producer Japan Tobacco caused by the tsunami in March, with BAT getting sales of 2 billion tobacco products and a revenue of 50 million pounds as it provides that market with imports from the United States. This increased BAT’s Japan market share to 20% from 10% before, but Durante declared that he hoped Japan Tobacco will recover the majority of the share it had lost.

BAT has defended from the slowdown by its widespread business, with the economies of its five largest markets of Australia, Brazil, Canada, Russia and South Africa. In comparison, smaller British competitor Imperial Tobacco has been affected by a price war and a weak market in Spain, which is the third biggest market which accounted for approximately 10% of gains last year, whereas BAT gets less than 1% of its revenues there.

BAT, the world’s second largest tobacco company behind Marlboro-manufacturer Philip Morris International, declared its first-half adjusted operating profit increased 12 % to 2.7 billion pounds while overall income raised 2 % to 7.4 billion pounds.

By Clark Moore, Staff Writer Copyright © 2011 Hot-Cigs.com All rights reserved.