Luke Judge

February 24, 2011, 7:12 AM EST

by Tom Mulier

(Updates with comments on acquisitions in seventh paragraph.)

Feb. 24 (Bloomberg) — British American Tobacco Plc, Europe’s largest cigarette maker, plans to resume buying back shares after a two-year break caused by the recession.

the maker of Lucky Strike cigarettes will seek to repurchase 750 million pounds ($1.2 billion) of stock in 2011, it said today. London-based BAT bought back shares from 2003 to 2008, before suspending the program in 2009.

BAT fell as much as 3.4 percent in London trading as some analysts expressed disappointment at the scale of the buyback, which is smaller than rivals such as Philip Morris International Inc. David Hayes at Nomura had estimated the company may repurchase more than 1 billion pounds of stock. BAT’s free cash flow increased by 23 percent to 3.24 billion pounds in 2010.

“the size of the buyback is less than we thought they could do,” said Erik Bloomquist, an analyst at Berenberg Bank in London with a “buy” rating on BAT. He estimates the buyback will boost the company’s earnings per share about 2 percent.

BAT shares dropped as much as 81 pence to 2,332 pence and were down 2.2 percent at 2,360 pence as of 11:31 a.m.

the buyback is the equivalent of a 1.6 percent stake based on a market value of 47.2 billion pounds, Bloomberg calculations show. Philip Morris, the New York-based maker of Marlboro cigarettes, said on Feb. 10 that it plans to buy back $5 billion of stock in 2011, the equivalent of a 4.4 percent stake.

“We like to keep a little bit of firepower available for any tuck-under acquisitions that are out there, so we keep an eye on that,” Chief Financial Officer Ben Stevens told analysts at a meeting in London available via BAT’s website.

the maker of the Dunhill and Kent brands is studying several smaller acquisitions, he said, adding that BAT doesn’t expect any “major industry consolidation” in coming years.

Productora Tabacalera de Colombia Protabaco Ltda., a Colombian cigarette maker, is a possible target for BAT, according to Giulio Lombardi, an analyst at Fitch Ratings. Philip Morris on Jan. 5 abandoned an agreement to buy the Colombian company for $452 million. Michael Prideaux, a spokesman for BAT, declined to comment on Protabaco.

BAT said net income climbed to 2.88 billion pounds in 2010. Adjusted earnings per share, which exclude reorganization costs, trademark amortization and impairment, goodwill impairment and capital gains, rose 15 percent to 175.7 pence, beating the 174.3 pence average estimate of 18 analysts compiled by Bloomberg.

Revenue rose 4.8 percent to 14.88 billion pounds, less than the average analyst estimate of 14.97 billion pounds.

BAT said it boosted sales growth by about 6 percentage points through higher prices and more expensive brands to offset a drop in consumption and higher government levies. Japan increased taxes by a record 40 percent at the start of October, while cigarette tax rose 29 percent in Turkey at the end of 2009 and 25 percent in Australia in April.

the global market for cigarettes excluding China, which is largely closed to foreign tobacco companies, will probably shrink by 2.5 percent in 2011, said Nicandro Durante, who will become chief executive officer when Paul Adams retires at the end of this month. BAT’s volumes should be a “little bit better” than that as its brands gain market share, he said. BAT also has “good momentum” in pricing this year, he said.

the operating margin rose to 33.5 percent in 2010 from 31.4 percent in 2009. BAT has a goal of reaching 35 percent by 2012 and will set a new target for its operating margin if it reaches that objective early, CFO Stevens said.

Australia will probably introduce legislation requiring cigarettes to be sold in packages without brand imagery and logos in 2012, Adams said on the company’s web site. the move would reduce competition in the country, where BAT has a 42 percent market share, he said.

BAT also said today that it plans to pay a final dividend of 81 pence a share, raising the total dividend payment for the year by 15 percent to 114.2 pence a share.

–Editors: Paul Jarvis, David Risser.

To contact the reporter on this story: Tom Mulier in Geneva at .

To contact the editor responsible for this story: Celeste Perri at .

Cigarette Tins Collectables bloomquist, buyback, recession

There are very few items in life that you can stare out, laugh, and ponder why you weren’t the person to come up with such a brilliant yet simple concept.  Joining the ranks of the post-it note, Showtime Rotisserie (Set it, and forget it!) and any other simply amazing product is the Stinky Ashtray.

Stinky ashtrays were born as a stainless steel bowl, typical of a kitchen mixing dish, that has oval shaped “cigar stirrups” spot welded on the edge to hold the cigar firmly in place. It would be deep enough to hold hours of smoking ash, wrappers, cedar and anything else a small group would discard during a standard HERF session. And that is it. The Stinky is very simple, functional and the ashtray finally became beautiful.

So how did all of this come about? According to the StinkyCigar.com website “I developed this ashtray out of a need at our weekly herf. We need bigger ashtrays! The first Stinky Cigar Ashtray was a second hand silver bowl that I had for years. In January of 2004, I took three souvenir coins to a radiator shop and had them soldered to the rim. The guys loved it and wanted me to make some for them. It was a lot of work, so I said no. Each week they would repeat their desire to have a large bowl ashtray.”

I guess it’s safe to say the rest was history. Today I can say that the Stinky ashtray is the standard for cigar companies presenting at shows (IPCPR) and just about every cigar lounge around the country. It also comes to no surprise that Stinky has also implemented some great changes to help evolve his product even further.

Consumers now have the ability to purchase various sizes (HERF Edition holds 3 gallons of ash), floor stand models, handles for easy carrying/dumping and my personal favorite the Powder Coated models. The Powder Coated ashtrays are the new “smaller-taller” editions that stand 6.5 inches tall and 7 inches in diameter that still hold the same amount of ash as the original design.  Powder Coating helps keep the bowl in pristine shape for the wet environments and cool to the touch in the hot climates. Each of the black and brown color combination’s are still capped with the stainless stirrups that creates a brilliant and eye-catching contrast.  You can acquire one of these new ashtrays for a small investment of about $35 and is well worth the “investment” because it is one of the few smoking accessories your wife (or non-smoking other half) won’t mind keeping on display.

As a quick side note, and story I think everyone can relate to, this is how Stinky got his name: “Stinky got his name from his wife when he started smoking cigars and came into the house with that familiar odor.”

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Cigarette Tins Collectables herf, powder coating, pristine shape, showtime rotisserie, silver bowl, stirrups