British American Tobacco posted an increase in first-quarter revenue, but warned investors that a negative impact from currency impacts could have a detrimental effect on its full-year profit.
In the three months to 31 March, the FTSE 100-listed company posted a 1.7% year-on-year gain in revenue. The increase, however, was held back by strong currency headwinds and the tobacco manufacturer said revenue would have grown by 7.5% at constant currencies.
Recent acquisitions helped cigarette volume grow 3.6% from the corresponding period a year earlier with volume increasing in a number of markets including Ukraine, France, Spain, Russia, Middle East and a number of Asian countries.
This more than offset lower volume in markets including Pakistan and Malaysia, which were impacted by significant excise-led price increases.
The group, meanwhile, warned the trading environment would remain challenging for the foreseeable future due to the ongoing currency volatility. Unfavourable exchange rates are forecast to lead to a profit headwind of 7%, which would in turn have a sizeable impact on operating margin for the full financial year, the group said.
"While profit growth will be weighted to the second half of the year, partly due to the impact of foreign exchange on our cost base, I remain confident that we will deliver another year of good earnings growth at constant rates of exchange," said group chief executive Nicandro Durante.
However, British American Tobacco indicated its earnings could be boosted by approximately 3%, should the sterling remain at current levels for the remainder of the year.