Russian surge lights up BAT

BRITISH American Tobacco today beat analysts' profit forecasts after sales of star brand Kent surged in the fast-growing Russian market.

Shares in the maker of Dunhill and Lucky Strike rose 2% as investors were impressed by underlying earnings per share growth of 26% in the first three months of the year.

Good performances in France and Germany, where hefty cigarette tax rises have hit sales in the past year, were welcomed as evidence that those markets were stabilising.

There were negatives, though, particularly in Canada and Japan, hit respectively by a trend of trading down to cheaper brands and a price war launched by Altria's Philip Morris, owner of Malboro. Volumes and profits crashed in Italy after January's introduction of a smoking ban in almost all public areas.

Chairman Jan du Plessis admitted the 26% earnings per share growth was unsustainable, and was mainly due to one-off tax benefits. But even without those, underlying profits were up 6%.

Overall, sales of BAT's main brands, known in the company's marketing-speak as global drive brands, gained a slightly disappointing 2%.

Profit and turnover figures for the three months to 31 March were hugely skewed downward by accounting changes, which made pre-tax profits appear to fall to £582m from £604m a year earlier.