Interim Management Statement for the three months ended 31 March 2010

• Solid revenue growth at constant exchange rates, further enhanced by translation exchange rates
•  Volumes from subsidiaries decreased by 1 per cent to 168 billion, organic volumes down by 4 per cent
•  Global Drive Brands volume grew by 6 per cent

Trading update

British American Tobacco performed well in the three months to the end of March, although total volumes were slightly lower.

Group revenue for the three months grew in constant currency terms, driven by continued strong pricing momentum and the acquisition of PT Bentoel Internasional Investama Tbk (Bentoel) in Indonesia on 17 June 2009. All regions grew revenue at constant rates of exchange with particularly strong performances from Africa and Middle East and Americas. Revenue benefited further from the favourable impact of exchange rate movements.

Group volumes from subsidiaries were 168 billion, down 1 per cent from 170 billion in 2009, while organic volumes were 4 per cent lower, in line with the decline in market sizes. Significant industry volume declines in markets such as Brazil and Romania, where Group market share grew, and in Ukraine and Japan, where market share was maintained, drove this volume decline. The adverse impact on Group volumes was highest in the low-priced segment. First quarter volumes benefited from the acquisition of Bentoel.

The four Global Drive Brands delivered a good performance and achieved overall volume growth of 6 per cent and share growth in a number of key markets. Dunhill was up 24 per cent, helped by the migration of Carlton to Dunhill in Brazil, while Lucky Strike grew by 8 per cent and Pall Mall by 10 per cent, respectively. Kent volumes were 12 per cent lower mainly driven by industry volume declines in Japan, Russia and Romania, despite growing or maintaining market share in those markets.

Market share in our top 40 markets was in line with the start of 2009 and ahead of our Q4 2009 share.

Trading environment

This good performance was achieved against lower industry volumes in a number of important markets, such as Japan, Brazil, Russia, Romania and Turkey. The general economic environment with rising levels of unemployment, together with increases in excise, resulted in continued pressure on the premium segment and in some markets, particularly in Central and Eastern Europe, there was down-trading to illicit trade, affecting the low price segment.

The Group continued to address its cost base and, amongst other initiatives, finalised the consultation process with a view of consolidating the sales and marketing organisations in the Benelux markets as well as entering information and consultation on the future of the Jawornik factory in Poland.

Cigarette volumes

The segmental analysis of the volumes of subsidiaries is as follows:

Bentoel grew volumes and share in Indonesia and contributed 5 billion sticks to the Asia-Pacific region.

Comment

Paul Adams, Chief Executive, commented “Our consumers are clearly finding economic conditions difficult and volumes suffered as a result of market size declines. However, there was continued pricing momentum and good growth in market shares, leading to solid revenue growth. We remain on track for the year.”

Interim Management Statement for the three months ended 31 March 2010 - full announcement (61 kb)