Up in smoke

The new British American Tobacco finance director, Ben Stevens, has some big
shoes to fill. His predecessor steered the ship at the cigarette giant for six
years, a period in which the share price of the company has more than tripled.

Stevens, who has a business school qualification rather than being a
chartered accountant, faces the challenge of continuing to grow revenues in an
environment increasingly hostile to smoking in general.

What’s happened
Paul Rayner, Stevens’ predecessor, steps down in April. A BAT old-hand, he will
have been at the company since 1991, and FD since 2002.

His record has been exemplary. BAT has been enjoying steady growth recently,
with its share price doubling since 2004.

The company has also been at the centre of frenzied M&A activity
recently, carrying out two deals collectively worth more than £3bn in the course
of the last fortnight.
Stevens can boast an even longer apprenticeship than Rayner, having joined in
1990, currently filling the role of director for Europe.

What’s going to happen?
Analysts are very upbeat about BAT. ‘It is doing quite well. It has a larger
geographical reach [as a result of the deals] than its rivals,’ says Tina Cook
of Charles Stanley.

The challenge, then, will be to maintain the momentum, and ensure BAT doesn’t
run out of puff.

The problems the tobacco industry faces in general will be the company’s
major headache, she adds. ‘This year we’ve seen three new national smoking bans
[in the UK, Germany and France]. Russia, which is the largest market, is
planning to ban tobacco advertising in five years,’ she says.

The wave of distaste for smoking is not the only issue, however. ‘Increased
taxes on cigarettes are causing smokers to choose cheaper brands,’ says Cook.

BAT might be able to combat that by promoting their less expensive products,

but it is likely to put pressure on margins.

There are also some attractive opportunities for mergers around. Some
state-owned tobacco companies are possible takeover targets, it is thought, and
BAT, with its new found love of splashing the cash, could be in the market.

What will make Stevens less popular, however, is the company’s cost-cutting
programme. BAT has an ongoing plan for cutting back, with £800m of savings
earmarked for the next five years.

As with most FDs, Stevens will be landed with that pleasure: will he sail as
high as his predecessor, or end up the butt of industry jokes?

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