(Reuters) – British American Tobacco <BATS.L> reported stronger-than-expected first-half profit on Friday, as consumers bought more vaping products and higher-priced cigarettes in the United States, its biggest market.
The Dunhill and Lucky Strike cigarette maker said consumption in the United States was “resilient” with the company increasing its share of the U.S. cigarette market by 30 basis points in the first half of the year.
Newport and Natural American Spirit cigarettes were among the top performers in the United States, Chief Marketing Officer Kingsley Wheaton said, adding that revenue from e-cigarettes such as Vuse grew 75% in the first half.
Investors have kept a close eye on the United States, where BAT makes about 50% of its total profits before taxes from cigarettes. A spike in COVID-19 cases in the past few months has raised fears that fewer people would venture out to buy cigarettes.
However, Wheaton said the United States showed a “very strong performance”, with 3 million more consumers trying BAT products since the start of the year.
The company also revised its industry volume forecast for the United States to be down 2.5% this year, from down 4% earlier.
“BAT is in an elite group of resilient businesses who have been able to grow sales, earnings and cash flow during the challenging COVID-19 period,” Liberum analyst Nico von Stackelberg wrote in a note.
BAT shares, which have lost 18% of their value this year, were up 1.6% in morning trading. The strong company report mirrored those of rivals Philip Morris <PM.N> and Altria <MO.N> earlier this month.
On Friday, BAT said total cigarette and tobacco heating product volumes declined 6.3%, slightly better than the consensus forecast for a 6.5% drop, mainly due to COVID-related disruptions in markets such as South Africa and Mexico.
Adjusted earnings per share (EPS) rose 5.7% to 157.8 pence, while revenue rose 0.8% to 12.27 billion pounds in the first half. Both were higher than analysts’ forecasts for EPS of 154.5 pence and revenue of 12.20 billion, according to Refinitiv Data.
The London-based company also kept its forecast for full-year adjusted revenue growth and EPS in constant currency.
(Reporting by Siddharth Cavale in Bengaluru, Editing by Sherry Jacob-Phillips and Nick Macfie)