British American Tobacco profits increase amid higher prices

British American Tobacco, the second-largest tobacco company in the world, revealed an increase in income in 2012 as the company increased prices amid stricter laws against smoking.

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The manufacturer of Dunhill, Kent, Lucky Strike and Pall Mall cigarettes announced a 14.5% increase in pre-tax income of £5.6bn in 2012, up from £4.9bn in 2011.

The London-based company said income from operations had got better in all its four operating places, up 15% totally to £5.4bn, but entire volumes dropped 1.6% as its biggest markets contracted.

BAT also raised its dividend per share by 7% to 134.9p.

“The company presented strong income growth in 2012, attained through good pricing and an excellent development in operating margin, partly offset by adverse exchange-rate movements,” BAT said.

BAT, which has the largest global spread of the big tobacco companies, sold about 700 billion cigarettes in the previous year.

British American Tobacco has brought up prices to balance out decreasing tobacco consumption and stricter government prohibitions on smoking.

More than 60% of its revenue flows from developing markets, which has helped balance out dropping smoking levels in Western Europe and North America, where cigarette companies are confronting stricter regulations on packaging and branding, as governments look for fighting issues over the long-term health costs of smoking.

Russia was the latest country to ban smoking in public areas, a step opposed by BAT and other cigarette companies.

Europe is planning to place larger health warnings on packaging and intoduce a total ban on menthol, while Australia was the first country to call for cigarettes to be marketed in drab, olive packets with graphic health warnings and without logos.

The step by Australia is tipped to result in an “olive revolution”, with similar actions being taken into account in Britain, Canada, China, France, India, South Africa, Norway and Uruguay.

This month New Zealand’s government declared that it would follow measure to drab cigarette packaging.

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