Cigarette giant British American Tobacco has said its vapour business is now the largest in the world outside the US thanks to the expansion of its Vype brand.
The Dunhill and Lucky Strike owner, which is reporting its results for the year to December 31, said its vapour business had now been extended to 10 markets.
In the UK, it’s share of the vapour market is now 40pc, according to independent data from AC Nielsen, thanks to its Vype brand and acquisition of Ten Motives.
The move towards a greater reliance on alternative products – the company also launched its tobacco heating product glo in Japan in December – is becoming even more important as the growth in the consumption of conventional cigarettes stalls.
British American did manage to halt the decline in cigarette volumes it saw in 2015 but only registered a marginal 0.2pc volume rise to 665bn in 2016.
There was, however, a 0.8pc drop on an organic basis but this was better than the average 3pc decline for the industry, British American said.
The weakness of sterling benefited the company, with revenue up 12.6pc if currency movements are factored in. This is because sales in dollars translate handsomely into the now weaker pound. Sales still rose an impressive 6.9pc on a constant currency basis.
But the currency markets weren’t entirely beneficial for the group. On a constant currency basis, adjusted operating profit rose 4.1pc – a figure which would have been 10pc were it not for the “significant ongoing effect of adverse foreign exchange movements on our cost base during 2016″.
This meant underlying operating margins actually fell 0.9pc to 37.2pc if currency movements are included. Underlying operating margins rose 1.6pc excluding transactional foreign exchange and acquisitions.
Management said the proposed deal to buy the 57.8pc of Reynolds American it does not already own would give it a “world class portfolio of tobacco and Next Generation Products”, and that it would enhance earnings at the enlarged group. The transaction is expected to close during the third quarter subject to shareholder and regulatory approvals being sought. If the deal goes ahead, the company would become the world’s largest listed tobacco company by sales.