British American Tobacco is planning to rapidly expand its presence in the electronic cigarette market as the number of smokers declined in the US and Europe.
Despite the slump in sales, the world's second biggest cigarette maker posted a rise in revenue and profits, following the increase in prices.
The company's revenues rose to £7.57bn (€8.6bn, $11.4bn) in the first half of the year, up 2% on last year. Pre-tax profits were also up to £3bn from £2.8bn.
However, Bat's cigarette volume sales fell during in the period by 3.4%.
The volume dropped to 332 billion cigarettes as the stronger performance in the Asia Pacific markets, and its higher sales of premium brands, was offset by the weak European market.
The adjusted diluted earnings per share however rose by 7% to 109.1p due to the growth in profit.
The world's second biggest cigarette maker traded up over 1% at 1350 BST in London.
"Despite fragile economic conditions persisting in some parts of the world, notably Europe, British American Tobacco has delivered another good set of results. The business is performing well and we are confident of another year of good earnings growth," Richard Burrows, the chairman of the company said.
E-cigarette in the UK
Bat, whose premium brands include Dunhill and Lucky Strike, launched online sales of its e-cigarette brand Vype at the beginning of this week, in a bid to become the first major tobacco firm to offer these products in the UK.
"I think we'll be following it (Vype) up with other opportunities around the world with a reasonable degree of speed," Burrows said.
An electronic cigarette, which is a battery powered metal tube that turns nicotine laced liquid into vapour, is popular among the smokers who are trying to quit.
According to the Market consultant Euromonitor's estimation the world market is worth of about $2bn.
Most of the leading tobacco companies such as Imperial Tobacco, Reynolds American and Altria are now putting money on e-smokes as the market is eventually growing. Some analysts believe that the e-cigarettes will out-sell conventional cigarettes in 10 years' time.
Analysts also expect that the number of e-smokers would grow from 700,000 in 2012 to 1.3 million this year in Britain. The E-cigarettes will be regulated in the UK as a non-prescription medicine from 2016.
The company said that Vype will hit the shops in Britain from September this year.