BAT Says More Than One in 20 Cigarettes Worldwide is Illicit

March 27 (Bloomberg) -- British american Tobacco Plc said More than One in 20 Cigarettes smoked worldwide is either smuggled or produced illegally, ...

March 27 (Bloomberg) -- British american Tobacco Plc said More than One in 20 Cigarettes smoked worldwide is either smuggled or produced illegally, making the illicit trade bigger than the yearly sales of rival Imperial Tobacco Group Plc.

About 300 billion Cigarettes, or 6 percent of the total market, are illicitly sold each year, the London-based company said in its annual report, released today. BAT, Europe's biggest publicly traded tobacco company, makes Kent Cigarettes.

Smuggling and counterfeit Cigarettes are a ``key concern,'' BAT Chief Executive Officer Paul Adams said in the annual report. ``We continue to work proactively with governments and customs authorities to try to stem this rising tide.''

The illicit trade has grown as the world's population of people over 20 years old increases, buoying demand for Cigarettes, BAT said. The figure is equivalent to almost a third of the Cigarettes shipped each year by Altria Group Inc., the biggest publicly traded tobacco company, and exceeds Imperial's yearly production of 187 billion.

Illicit producers would be the world's fifth-largest cigarette company if consideRed in a block.

The maker of Lucky Strikes said population growth will keep the number of Cigarettes smoked worldwide ``broadly unchanged'' at about 5 trillion through 2015, even as the proportion of adults smoking declines.

``There will still be a great deal to play for,'' Adams said in the report.

CEO Pay

Tax increases, warning labels and advertising restrictions have weighed on consumption in key markets for BAT such as Canada, Germany and Japan.

Separately, BAT raised Adams' pay by 21 percent last year as profit beat its long-term goal for a third consecutive year since he started the job.

BAT paid Adams 2.57 million pounds ($5.1 million) in salary and bonuses in 2006. The maker of Lucky Strikes raised per-share profit excluding One-time items by 10 percent last year, beating its goal for ``high single-digit'' average growth.

Imperial Tobacco, which makes Davidoff Cigarettes, paid CEO Gareth Davis 2.7 million pounds in the year through September, 0.8 percent less than in the prior period.

BAT is the world's second-biggest publicly traded cigarette company. Bristol, England-based Imperial ranks second in Europe.


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