TOBACCO INTERNATIONAL

TI March 2016

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MARCH 2016 TOBACCO INTERNATIONAL 17 Nicandro Durante, CEO How did you perform over the full year? Did the second half come in as strong as you expected? Nicandro Durante: 2015 was a very good year for us, and the second half was very strong, as we anticipated at the interims. We faced in 2015 a very challenging economic environment, and because of that, we had some headwinds in currency—translational and transactional. But if you look on a constant basis, we grew revenue 5.4 percent. Profit was up four percent, excluding transactional, 10 percent, which is quite a strong performance. Share was up strongly last year in all the segments—Premium, GDBs (global drive brands) so very, very good. And, if we look at underlying operating margin, it was 160 basis points up, but because of the impact of transactional FX (foreign ex- change), we had reported 60 basis points down. Looking at EPS (earnings per share), it was constant, as well, 10 percent up. Excluding transactional impact, it would have been 16 percent, one of the best performances of this company, excluding currency, in the last 10 years. So, it was indeed a fantastic year for BAT. The GDB's had an outstanding year, and Roth- man's was the star performer. Can this continue? Durante: I think so. If you look at the GDB's performance in the last 10 years, we have doubled the volume. Nowadays, GDB's are more than 45 percent of our total volume, so it is fantastic, and year after year, driven by innovations, the GDB's have performed very well. And 2015 was no exception. Vol- umes are up 8.5 percent and all the brands have performed extremely well, growing volume and share, with the exception of Kent, because of its premium position. It's growing the premium segment, but overall, the share was flat, so fantastic, when you look at the overall industry it is declining 2.3 per- cent and the GDB's growing 8.5 percent. It is indeed a very good, performance. In the case of Rothman's, what we're see- ing across the world, we have seen some headwinds in terms of some portfolio mix, not in ours, but in the industry, and Roth- man's is playing extremely well in a segment which is growing very fast—that's the value for money segment. Rothman's has grown 70 basis points last year. It is supplying consumers with a good quality, with very interesting premium SKUs. It's doing extremely well, so I don't see any reason for next year not to have also a very good performance for the GDB's. British American Tobacco: A Strong Year Despite Challenges BAT's preliminary results for 2015 showed progress despite headwinds. A discussion with BAT's Nicandro Durante, CEO and Ben Stevens, Financial Director. –By Murdoch McBride MANUFACTURER PROFILE

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