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SCMP Reporter

BAT Industries, the giant tobacco and financial services group, saw about GBP1 billion (about HK$11.9 billion) wiped off its London market value yesterday after a Florida court awarded US$750,000 in damages to a cancer sufferer.

  The company sells the popular State Express 555 brand, the leading foreign brand in China. Its shares dropped almost 9 per cent to close 45 pence, or 8.8 per cent, down to GBP4.64.

  BAT's American depositary receipts on the American Stock Exchange fell slightly at last week's close.

  On Friday, a United States court found in favour of a plaintiff who had sued BAT's US subsidiary Brown and Williamson Tobacco, the third biggest US tobacco manufacturer, claiming it had not warned smokers tobacco could be dangerous.

  Yesterday, analysts said investor confidence in the company had been shaken by the court decision, warning it could spur a string of cases against tobacco companies.

  BAT said it would appeal against the decision.

  Analysts also cautioned that BAT stock went ex-dividend yesterday, and the shares would have moved in response to a 10 p net dividend awarded at the group's interim last month.

  Nervousness haunted the market because at its interim results, presentation analysts had reported BAT was confident of being able to fight off any product liability suits.

  'The industry's attitude recently has been that they've never lost a case, and that they don't expect to,' SBC Warburg tobacco analyst Jonathan Leinster said.

  'That falls flat on its face, when a week later they come out and reveal an action like this.'    The case is regarded as fairly unique in that plaintiff Grady Carter, a 66-year-old retired air traffic controller, had started smoking unfiltered Lucky Strike cigarettes in 1947, and only changed brands in 1972.

  Government health warnings started appearing on cigarette packets in 1966 in the US, 19 years after Mr Carter began smoking, and this was being regarded by investors as a more convincing ground for complaint.

  The previous major tobacco action was in 1988, when $400,000 was awarded to the husband of Rose Cipollone, who died of cancer after smoking 30 cigarettes a day from the age of 16. That award was only overturned three years later in 1991, although yesterday BAT said it expected a decision on the Carter case within a year.

  'We feel that there are good grounds for appeal,' a BAT spokesman said.

  He said highly speculative information had been allowed to be used in evidence, including testimony the company could have, and should have, developed a safer cigarette, which the plaintiff could have smoked.

  The spokesman said a series of enticing adverts were shown in the court, which in fact had been run before the plaintiff was born.

  'Under the Florida courts, we feel that they way the trial was conducted was flawed,' the spokesman said.



Courts blow triggers BAT share sell-off