bat plc annual report 2007 - Africa and Middle East

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Annual Report and Accounts 2007

"In line with our vision ‘to strengthen our position as the leading tobacco company in the region’, Africa and Middle East had a good year in 2007 with strong underlying results."

Andrew Gray
Director, Africa and Middle East
Andrew Gray

Profit in the Africa and Middle East region was £2 million higher at £470 million due to exchange rate movements. However, at comparable rates of exchange, profit would have increased by £53 million or 11 per cent with strong performances from South Africa and Nigeria. Volumes were 4 per cent lower at 101 billion, resulting from supply chain disruption in the Middle East and a change in distribution model in Turkey.

Supporting the global strategy

Cigarette kioskGlobal Drive Brands grew strongly across the region. Major milestones achieved include Dunhill selling in excess of 1 billion cigarettes in South Africa, Pall Mall having been launched in 15 markets and Kent remaining the leading brand in the Caucasus.

The productivity programme continued to drive unnecessary cost and complexity out of the business. It included rationalising the factory footprint, changing management structures and obtaining economies of scale through consolidation of spend and implementation of shared services. Effective stakeholder engagement continued, with increased dialogue on industry issues including anti-illicit trade and smokeless tobacco.

In South Africa, despite the weaker average exchange rate, good profit growth was achieved as a result of reductions in illicit trade, an improved product mix and higher margins. The margin improvements were the result of pricing and productivity improvements across the business. Dunhill recorded its highest ever market share and Peter Stuyvesant continued its growth.

Strong profit growth in Nigeria was the result of higher margins, the benefits of productivity initiatives and an improved product mix. Share performance was particularly strong for Benson & Hedges and was supported by Dunhill and Pall Mall. Volumes were marginally lower as a result of trade de-stocking following the country’s elections.

In Sub-Saharan Africa, supply difficulties in West Africa at the beginning of the year impacted volume and profit, while a number of markets in East Africa delivered productivity savings and grew volumes reflecting lower levels of illicit trade.

In the Middle East, the brand portfolio mix improved across the area through the growth of premium brands, although profit was adversely affected by lower volumes as a result of supply chain disruptions and weaker currencies. Dunhill continued its growth in Saudi Arabia and the Arabian Gulf and grew market share. North Africa showed improved volume and profit performance, with market share in Egypt growing as a result of strong performances by Kent and Rothmans.

Volumes, market share and profit in the Caucasus were all well ahead of last year. The higher volumes reflected significant increases in Dunhill and Vogue, while Kent remained the leading brand. In Turkey, volumes and market share were higher but operating losses increased due to the one-off costs associated with the change in the distribution model in January and higher brand support with the launch of new brands.

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