* Sees single-digit core profit growth
* Adjusted EPS up 6 pct in 2013, in line with consensus
* Currency headwinds could impact this year
* Shares down 1.2 pct
By Sarah Young
LONDON, Feb 27 (Reuters) - British American Tobacco (LSE: BATS.L - news) , the world's No. 2 cigarette maker, said it expectedsingle-digit core earnings growth again this year as itcontinues to expand its share of a shrinking cigarette market.
BAT's core earnings rose 6 percent in 2013 as it snapped upa bigger share of its key cigarette markets, boosted by growthof its global brands Kent, Dunhill, Lucky Strike and Pall Mall.
"We think we'll continue to be able to deliver the highsingle digit earnings per share growth," BAT's director ofcorporate affairs, Kingsley Wheaton, said in an interview onThursday.
Last year, innovations such as "capsules" which can changethe taste of a cigarette to menthol drove sales in Malaysia andother parts of Asia, while an "additive free" range of LuckyStrikes proved popular, particularly in Germany, said Wheaton.
BAT's overall cigarette volumes declined by 2.7 percent in2013, a less steep decline than the wider industry which shrankby 3 percent, Wheaton said.
Big tobacco companies including BAT's rivals Philip MorrisInternational and Imperial Tobacco (LSE: IMT.L - news) are grapplingwith waning demand in a number of markets due to increasinggovernment regulation and more health-conscious consumers, aswell as economic weakness and smuggling.
But Wheaton said BAT's focus on its global brands, combinedwith more product innovation and further tight control of costs,would underpin earnings growth this year.
The company improved its operating profit margin by 100basis points last year, partly through a standardisation of itssystems.
BAT posted 2013 adjusted diluted earnings per share of216.6, up from 205.2 pence last year and in line with an analystconsensus forecast of 216.8 pence.
Adverse currency movements in countries including Brazil,Australia, Japan and South Africa impacted earnings by about 4percent, BAT said. On a constant-currency basis, adjustedearnings per share would have come in 10 percent higher at 224.7pence.
"If the rates remained as they are today for the rest of theyear, we would indeed have another year of some currencyheadwinds," Wheaton warned.
Panmure Gordon analysts estimated that currency headwindscould depress BAT's revenue by around 11 percent this year.
SHARES OUTPERFORM FTSE
Shares in BAT traded down 1.2 percent at 3,134 pence at 1028GMT. Britain's bluechip FTSE 100 index which was down0.9 percent.
"I think there was a growing unease that maybe theunderlying markets would have been getting tougher for BAT sothe fact that they've come in with a robust set of underlyingnumbers is quite reassuring," said Societe Generale (Paris: FR0000130809 - news) analyst ChasManso.
The company said it would lift its annual dividend by 6percent to 142.4 pence per share, and confirmed a further 1.5billion share buy-back programme for 2014.
To help secure growth in the longer term, BAT, like itsrivals, is investing in electronic cigarettes - battery-poweredmetal tubes that turn nicotine-laced liquid into vapour.
These so-called e-cigarettes are gaining popularity inmarkets such as Europe and the United States, with peoplelooking for smoking alternatives.
BAT launched its own version called Vype in Britain lastJuly, but did not give details of its performance on Thursday.
Earlier this month, the company became the biggest tobaccocompany to show a television advert for e-cigarettes in Britain,using the strap line "pure satisfaction for vapers" ontelevision, but "pure satisfaction for smokers" online.
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