British American Tobacco, the world's second-biggest cigarette maker, reported signs global economies were starting to improve, as it met forecasts with a 19 percent rise in 2009 earnings on Thursday.

The London-based group, which makes Kent, Dunhill, Lucky Strike and Pall Mall cigarettes, gained a boost from price rises, acquisitions, and the weak pound which offset falling underlying volumes and downtrading to cheaper cigarettes.

"From a global viewpoint, generally the worst is over and we would expect recovery to come first in our developing markets," said company spokesman Michael Prideaux, adding that these emerging markets account for around two-thirds of group sales.

He added the group saw good pricing momentum going into 2010 with consumers prepared to pay more for cigarettes, although rising unemployment was still a concern around the world.

BAT shares dipped 1.9 percent to 21.88 pounds by 11:18 SA time after a strong recent run when it outperformed UK rival Imperial Tobacco by 7 percent over the last month. Despite the share price fall, analysts were generally positive.

"Positive earnings momentum, a dividend yield of 4.5 percent and an attractive valuation should be supportive," said analyst Rogerio Fujimori at brokers Credit Suisse.

UBS's Jonathan Leinster said the recent weakness of the pound will see some earnings upgrades for 2010, after 2009 profits gained 355 million pounds (R4.3 billion) from currency translation.

The group posted 2009 adjusted diluted 2009 earnings per share (EPS) of 153 pence largely in line with a Thomson Reuters I/B/E/S consensus of 152.6p and a company conducted survey consensus of 152.9p.

"There are signs that the global economy is beginning to improve, although unemployment, which is an important influence on our business may continue to rise in developed markets," said Chairman Richard Burrows.

Group underlying cigarette volumes fell 3 percent in 2009 hit by deteriorating economies, and were set to fall a further 2 percent in 2010, but sales of its more expensive cigarettes grew with its top four key brands up 4 percent last year.

Eastern Europe was BAT's only region to show a profit fall largely due to tough conditions in Russia, but the group saw good volume growth in South Korea, Vietnam and Nigeria.

Profits were boosted by the acquisition of Turkey's Tekel and Denmark-based ST in 2008 and Indonesia's PT Bentoel last year, while it gained from the weaker pound against most major currencies and higher cigarette prices.

Annual revenue and adjusted operating profits rose 17 percent and 20 percent, but stripping out the effects of exchange rates both rises were 10 percent.

The full-year dividend, which is set at 65 percent of earnings, rose 19 percent to 99.5p a share.

Earlier this month, BAT's bigger rival Philip Morris International beat forecasts with its fourth-quarter earnings as price rises and emerging market growth from the Marlboro-making group offset cigarette volume falls in the European Union. - Reuters