Results of associates
Associates principally comprise Reynolds American, ITC and Skandinavisk Tobakskompagni (ST).
The Group’s share of the post-tax results of associates increased by £11 million, or 3 per cent to £442 million, after taxation of £246 million (2006: £216 million).
Excluding the exceptional items explained under Associates in the Financial review, the Group’s share of the post-tax results of associates at £449 million rose by 5 per cent. However, the Group’s share of these results was particularly affected by the weakening of the average US dollar rate against sterling from 1.844 to 2.001 and, at comparable rates of exchange, the increase would have been 11 per cent.
The contribution from Reynolds American, excluding exceptional items, was only £4 million higher due to the impact of the weaker US dollar. At comparable rates of exchange, the contribution from Reynolds American would have been £28 million higher at £313 million. The impact of increased pricing, moist-snuff volumes and productivity more than offset lower cigarette volumes and higher settlement expenses.
The results of Reynolds American also reflect the inclusion of the first full year of Conwood’s results and that company’s continued growth. As explained under Changes in the Group in the Financial review, Reynolds American acquired Conwood on 31 May 2006 and reported that on a pro forma US GAAP basis, as if it had been owned since the beginning of 2006, Conwood increased volume, margins and profit.
The Group’s associate in India, ITC, continued its strong revenue growth and its contribution to the Group rose by £17 million to £108 million, with the growth helped by one-off costs in 2006.
The contribution from the Group’s associate in Denmark, ST, rose by 4 per cent to £48 million.
Associates’ volumes decreased by 4 per cent to 230 billion and, with the inclusion of these, total Group volumes were 914 billion (2006: 930 billion).