June 12, 2018 / 6:32 AM / 9 days ago

BAT forecasts earnings growth despite currency headwinds

LONDON (Reuters) - British American Tobacco (BATS.L) said on Tuesday it expects to weather a weaker pound and a slowing market for tobacco-heating devices in Japan to report “good” earnings growth for the full year.

FILE PHOTO: A staff of British American Tobacco Japan shows displays a tobacco after smoking using its new tobacco heating system device 'glo', following a news conference in Tokyo, Japan, November 8, 2016. REUTERS/Kim Kyung-Hoon/File Photo

The world’s second-biggest international tobacco company by revenue said that trading in the first half of the year was in line with expectations and that adjusted revenue and profit growth would be weighted to the second half. due to several items affecting its first-half comparisons.

The maker of Lucky Strike and Dunhill cigarettes said “good adjusted constant currency EPS growth” was expected to be impacted by a significant currency translation effect of around 9 percent for the first half and 6 percent for the full year, at current spot rates.

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It also noted that the market for tobacco heating products has slowed in Japan, though its product, glo, was growing and currently had 4.3 percent of the national market.

Such cigarette alternatives are increasingly important to big tobacco companies, as smoking rates fall.

With device supply constraints now lifted, BAT said it was on track for further Japanese and international rollouts in the second half of the year.

It said its e-cigarette business also continued to grow, and was on track to launch its Vype ePen3 in Britain in the third quarter.

The company made the comments in a trading update on Tuesday ahead of its half-year results, scheduled for July 26.

The update comes a day after BAT affirmed its goal for revenue from so-called next-generation products to double this year to more than 1 billion pounds and to reach more than 5 billion pounds in 2022.

That sent its shares up more than 2 percent. BAT’s shares had fallen 27 percent year-to-date, due largely to uncertainty over the future of those devices, which require a lot of investment.

Reporting by Martinne Geller, editing by Louise Heavens

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