BAT Earnings Jump (fwd)

[Robert Weissman <rob@essential.org>]

                        October 28, 1998

Business and Finance - Europe

British American Tobacco's Earnings
Jump Despite Turmoil in Asia, Russia

By ERNEST BECK 
Staff Reporter of THE WALL STREET JOURNAL

LONDON -- In its first earnings report as a stand-alone tobacco company,
British American Tobacco PLC posted a sharp rise in pretax profit for the
third quarter, despite sterling's strength and economic turmoil in Asia and
Russia.

BAT, which last month completed the merger of its financial-services unit with
Zurich Insurance of Switzerland, said third-quarter pretax profit surged 33% to
383 million pounds ($637.4 million) from 287 million pounds a year earlier.

At the London Stock Exchange Tuesday, shares in BAT fell 5.6% to 478
pence, down 28.5 pence, in what analysts said was a round of profit-taking
amid continuing investor concern over volatile emerging markets and lingering
nervousness about settlement costs in the U.S. tobacco-liability litigation
cases.

"It was a good quarter for BAT, but litigation and emerging markets are always
in the background," said Jonathan Fell, an analyst at Merrill Lynch in London.

Investor worries were prompted by BAT's warning that the "full force" of the
emerging-market crisis had been felt only late in the quarter and that the
fourth
quarter could be further affected by what its officials called "deteriorating
trading conditions" in several countries, including Russia and Ukraine.

"Asia, Eastern Europe and Latin America look edgy, and we have to sound a
note of realism. We are resilient, but not immune to what's happening," said
Michael Prideaux, a BAT spokesman in London. But BAT believes, he added,
that emerging markets will eventually recover and that there is no need to
change the company's overall strategy.

BAT, now the only major tobacco company that sells just cigarettes, attributed
the profit gain mainly to price rises in the U.S., related to the settlement of
tobacco-liability litigation, and the lack of extensive discounting on its main
brands, including Kool, Pall Mall and Lucky Strike, made by its U.S.
subsidiary, Brown & Williamson Tobacco Corp. The company also said the
launch in the U.S. of its Kool Natural brand, made from natural menthol and
other flavors, shows the company can be "innovative" in a market characterized
by ferocious discounting.

Still, BAT's total cigarette volume world-wide was little changed -- growing to
just 182.1 billion units from 181.4 billion units in the third quarter --
with U.S.
volume dropping 12% to 18 billion units in the quarter from 20.4 billion units a
year earlier. Volume also was stagnant in Europe, but in Japan it jumped 25%
to 6.9 billion units from 5.5 billion units in the year-earlier period.

In the first nine months of 1998, litigation-settlement and legal costs in U.S.
liability lawsuits included 150 million pounds for the Blue Cross and Blue
Shield
case in Minnesota and 75 million pounds related to Brown & Williamson's
share of an overall settlement. BAT said it expects further payments in the
fourth quarter but can't yet determine the exact amount.


URL for this Article:
http://interactive.wsj.com/archive/retrieve.cgi?id=SB909480234907051000.djm


       Copyright © 1998 Dow Jones & Company, Inc. All Rights Reserved. 





 October 27, 1998 


 Dow Jones Newswires

 WRAP: B.A.T Sees Further Tough Times In
 Emerging Mkts

 By ROBB M. STEWART and MICHAEL REID
 Dow Jones Newswires

 LONDON -- British American Tobacco PLC (BTI) Tuesday admitted it
 doesn't expect the tough conditions it faces in key emerging markets to
 subside next year.

 Yet the company put on a brave face, reassuring shareholders it won't be
 changing its strategy to ride out the turmoil, looking instead to cost controls
 and cash management measures.

 The market turmoil overshadowed B.A.T's stronger-than-expected
 nine-month earnings - its first results as a stand-alone tobacco company since
 it demerged its financial services arm into Allied Zurich (U.ADZ).

 Nine-month pretax profit fell 7% to GBP963 million, still above the GBP945
 million pegged by analysts. Third-quarter profit rose to GBP383 million from
 GBP287 million.

 But investor focus was firmly on the outlook, as sellers pushed the stock
 down 23.5 pence, or 4.6%, to 483 pence by 1225 GMT. The shares fell to
 479.75 pence earlier.

 While conceding the timing of its move into emerging markets wasn't ideal,
 B.A.T said it remains confident that growth in those markets will eventually
 return.

 However, near-term, it said conditions in Asia and the former Soviet Union
 were "extremely challenging," and likely to remain so in 1999.

 The interim dividend, meanwhile, may be a point of contention for some since
 analysts had penciled in a payment of as much as 8.5 pence a share. B.A.T
 declared a dividend of 8 pence, which it said reflects a policy of paying
out at
 least 50% of long-term sustained earnings. It added it expects the 8 pence to
 be about one-third of the total dividend for the year.

 Picking through the numbers, B.A.T reported a 3.0% rise in total cigarette
 volumes, moderated by lower volumes in North America. International
 cigarette brand sales jumped 11.0% with strength noted across all brands.

 Profit from Asia-Pacific rose GBP8.0 million over last year to GBP208
 million, with regional volumes only slightly ahead of a year ago. Improved
 margins and cost controls helped the company see continued strength in
 Australasian markets, while volumes in Indonesia were ahead of last year
 amid a significantly lower total market.

 Profits from Latin America came in 5.0% better than a year earlier at
 GBP243 million, which in part reflected a GBP78 million credit from a
 successful court action to recover sales tax in Brazil. But B.A.T said total
 volumes in Brazil continue to be hit by economic uncertainty and the
 government's fiscal package put in place to protect the currency.

 Profit from Europe was up GBP25 million at GBP170 million, with strength
 noted in Germany, Hungary and Scandinavia. Elsewhere, however, profits
 were hurt by worsening conditions in Ukraine and Russia and start-up costs in
 Romania.

 In the America-Pacific region, profit was GBP407 million against GBP422
 million last year, but the current figure excludes some GBP150 million in
 settlement costs with the Minnesota case.

 The company added that the Washington attorney general case has begun and
 that it has "robust defenses" to the class-action case brought against the
 tobacco industry in Florida.

 B.A.T said there are no signs in the U.S. Congress of any renewed attempt to
 pass comprehensive tobacco legislation.

 -0-         27/10/98 13-30G

       Copyright © 1998 Dow Jones & Company, Inc. All Rights Reserved. 

Full story
                                 FOCUS- BAT falls despite soothing words 
                                 02:32 p.m Oct 27, 1998 Eastern 

                                 LONDON, Oct 27 (Reuters) - British American
Tobacco Plc saw its shares fall
                                 5.6 percent on Tuesday despite reassuring
investors that growth in emerging
                                 markets would be restored over time. 

                                 BAT's shares closed down 28-1/2 pence at
478 1/2p in a bout of profit taking.
                                 BAT shares have risen from a year low of
around 370p in August. 

                                 ``There will be a bit of pain in the short
term but long term it remains the right
                                 strategy,'' said Merrill Lynch analyst
Jonathan Fell. 

                                 BAT reported a seven percent decline in its
nine month pretax profits to 963
                                 million pounds ($1.61 billion) compared
with analysts forecasts that ranged
                                 between 925 million and 985 million pounds. 

                                 BAT said that decline was principally a
result of the sale of businesses in 1997,
                                 demerger and restructuring costs and the
impact of currency movements. 

                                 Total cigarette volume grew by three
percent. Sales of international cigarette
                                 brands, which include Lucky Strike, Kent,
Pall Mall and Viceroy, rose by 11
                                 percent. 

                                 Third quarter pretax profit rose to 383
million pounds from 287 million in the
                                 comparative period and the company paid an
interim dividend of eight pence per
                                 share. 

                                 The figures are the first set to be
reported by BAT as a pure tobacco company.
                                 In September the group won high court
approval for its plan to merge its financial
                                 services division with Switzerland's Zurich
Insurance. 

                                 BAT said that there was no need to change
the overall strategy of the group, but
                                 noted that conditions are likely to remain
difficult in Asia, the former Soviet
                                 Union and Latin America in 1999.