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BAT eyes global e-cigarette market

London - British American Tobacco (BAT) said it would move rapidly to expand its presence in the electronic cigarette market around the world after launching its first product in Britain earlier this week.

The world's No 2 cigarette maker, whose premium brands include Kent, Dunhill, Lucky Strike and Pall Mall, launched online sales of Vype on Monday, becoming the first major tobacco firm to offer e-cigarettes in Britain.

"We'll focus on the UK, but the e-cigarette business is moving quickly all over the world, and we want to make sure that we also move quickly, because we want to take a leading position," BAT director Kingsley Wheaton said on Wednesday, after the firm posted a 4% rise in first-half sales.

"I think we'll be following it (Vype) up with other opportunities around the world with a reasonable degree of speed," he said.

Electronic cigarettes - battery-powered metal tubes that turn nicotine-laced liquid into vapour - are gaining popularity among smokers who are trying to quit. Market consultant Euromonitor estimates the world market was worth over $2bn last year.

All the top tobacco companies including Lorillard, Imperial Tobacco, Reynolds American and Altria are now placing bets on e-smokes, which some analysts say may outsell conventional cigarettes in 10 years.

In Britain, where BAT expects to sell Vype in shops from September, the number of e-cigarette users is expected to grow from 700 000 in 2012 to 1.3 million this year, according to analysts. E-cigarettes will be regulated in the UK as non-prescription medicines from 2016.

"BATS' move we would argue is positive and puts pressure on the UK major tobacco manufacturers to demonstrate their respective capabilities in the space," Panmure analysts said, adding the group's first-half results were broadly in line.

BAT said it was confident of another year of good earnings growth as price rises helped offset falling consumption to push first-half sales up 4% to £7.75bn at constant exchange rates.

Operating profit grew 4% to £2.94bn.

Sales volumes in the first six months of the year were down 3.4% at 332 billion cigarettes, as a strong performance in Asia Pacific and higher sales of its premium brands was outweighed by a fragile European market and tough one-off trade comparatives in Brazil and the Middle East.

"Despite fragile economic conditions persisting in some parts of the world, notably Europe, BAT has delivered another good set of results," chairperson Richard Burrows said.

Half-year adjusted diluted earnings per share rose 10% to 111.1 pence, and BAT declared an interim dividend of 45.0p, up 7% on last year.

Shares in the firm, which hit a record high of 3807.50p in May, were up 0.4% to 3474.0p at 09:18 GMT.

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