Volumes are running a little below expectations

Martin Broughton, chairman

"We aspire to be the first to launch successfully a new generation of tobacco products... that, over time, will be recognised by scientific and regulatory authorities as posing substantially reduced risks to health," BAT chairman Martin Broughton said.

He urged authorities to consider what would be deemed, from health grounds, as low-risk.

"There may be little merit in developing that might appeal to consumers without a consensus about what changes to the product regulators might accept as reducing risks," Mr Broughton added.

The statement came as BAT reported pre-tax profits of $472m for the first three months of the year, 1% up on the figure for the same period in 2001.

Areas of research

BAT's US unit, Brown & Williamson, has already developed cigarettes fitted with advanced filters designed to reduce levels of cancer-causing chemicals inhaled by smokers.

The company calls the new cigarettes "potentially reduced exposure products".

The cigarettes, sold under the Advance name, are being trailed in Indianapolis.

But, through research in Southampton laboratories, the firm is also attempting to refine processing techniques such that levels of nicotine and, in particular, tar in cigarette smoke are reduced.

"We are committed to it," a BAT spokeswoman told BBC News Online, although she was unable to say when the firm would release a low-risk cigarette onto the market.

The policy was part of a strategy to promote co-operation with authorities which have taken an increasingly fierce line with tobacco firms.

"We are not out to increase the number of smokers but to compete fairly for a valuable share of the existing market," Mr Broughton said.

"We can certainly foresee health authorities achieving gradually decreasing world volumes, while well-run tobacco companies continue to build sustainable value."

Falling sales

Mr Broughton said that BAT sales were, at 183 billion cigarettes, 6% lower by volume in the first three months of the year than during the same period last year.

"Volumes are running a little below expectations," Mr Broughton said.

Much of the decline was based on the global economic slowdown, with particularly strong competition hitting sales in Russia.

Profits from Argentine operations halved as the country's economic crisis, and the devaluation of the peso, hit sales volumes and the value of revenues, in foreign exchange terms.

But a "strong" performance by the State Express 555 brand helped Vietnamese and Cambodian divisions record "excellent results", BAT said.

And the firm took respite in the overall performance of its flagship Lucky Strike, Dunhill, Kent and Pall Mall brands.

"It is encouraging that our global drive brands managed to achieve an overall growth rate of 3%," Mr Broughton said.

City reaction

Mr Broughton said that, despite the volume decline, the firm was still in lien to achieve earnings targets.

But Tuesday's statement was cautiously received in the City, where BAT shares stood 2.1% lower at 694p in lunchtime trade.