London - British American Tobacco, the maker of Lucky Strike and Pall Mall cigarettes, said it’s on the hunt for acquisitions as it reported earnings near analysts’ estimates, helped by increased sales in France and Romania.
Adjusted profit from operations was £2.45bn in the first half, the London-based company said in a statement on Thursday. Analysts expected £2.49bn. BAT said profit growth will accelerate in the second half. The company’s shares rose as much as 2.1% in London.
"If there are any good deals out there, we would be interested," chief executive officer Nicandro Durante said in an interview on BAT’s website.
"M&A has been quite an important component of the results in the first half."
While analysts say that most of the big takeover opportunities in the industry have disappeared, the company has spent more than £5bn in past years on deals including a minority stake in its Brazilian unit and TDR, Croatia’s biggest cigarette maker. BAT shares have gained 28% this year to record levels as the stock has become a haven for investors betting that weaker sterling will help spur profit growth.
Translating earnings from abroad back into pounds will give a 4% boost to full-year earnings at current exchange rates, the company said. However, the tailwind is mitigated by the effect of buying tobacco in dollars and selling in many emerging markets, which BAT expects will hurt profit by 6 percentage points.
BAT - which generates less than 1% of its revenues domestically - doesn’t see a material effect on its business from the UK’s vote to leave the European Union, although the cigarette maker said the decision does create regulatory uncertainty.
“We don’t know whether the EU tobacco products directive, which has been transposed into national law, would be kept in the UK or not," BAT’s director of legal affairs Jerry Abelman said by phone.
That directive imposes more stringent regulation of the tobacco industry across the European Union.
BAT and its competitors are meanwhile losing a battle against European regulators, who are paving the way for plain packaging on cigarettes.
The company has filed a legal challenge against the French government’s decision to pass plain packaging into law, Abelman said. BAT lost a similar challenge in the UK.