LONDON, Oct 22 — British American Tobacco Plc fell the most since 2011 in London as weaker-than-expected quarterly sales raised questions over the scope for price increases in some of the cigarette maker’s main markets.

The shares dropped as much as 4.7 per cent as BAT said it saw “some moderation of the improvement in price mix” during the third quarter. That caused revenue growth to miss analysts’ estimates on a basis that excludes currency fluctuations.

Cigarette makers have been relying on price increases to boost sales amid declining tobacco consumption for at least five years. Today’s report from London-based BAT cited increased price competition in countries including Australia and Malaysia, along with a shift toward cheaper brands.

“Price competition has intensified in their key markets,” said James Bushnell, an analyst at Exane BNP Paribas in London. The tobacco companies’ model of raising prices to offset falling shipments isn’t broken, he said.

BAT shares were down 4 per cent at 3,329 pence as of 11:30 a.m. in London, trimming this year’s gain to 2.8 per cent.

Nine-month sales rose 2.4 per cent, excluding currency shifts, the maker of the Dunhill brand said today, missing the median analyst prediction for 3.2 per cent growth.

“The trading environment remains challenging due to continuing pressure on consumer disposable income worldwide and the slow economic recovery in western Europe,” BAT said. “Industry volume has declined at a lower rate than last year, but is being impacted by large excise-driven price increases.”

Declining shipments

A drop in cigarette shipments accelerated to 2.2 per cent in the third quarter, according to James Edwardes Jones, an analyst at RBC Capital Markets in London. A 1 per cent volume decline in the first nine months of the year was led by industry weakness in Russia, Vietnam, Brazil, Poland and Canada, BAT said.

“Our concern is that the economically driven market slowdowns we have seen in western Europe over the last year might be making their way to emerging markets,” Edwardes Jones said in a note. Heineken NV, the Dutch brewer, also reported sales that missed estimates today, citing a challenging macroeconomic climate in Europe and Russia.

BAT’s total nine-month revenue tumbled 9.6 per cent, hurt by the weakness of currencies such as the Brazilian real and Russian ruble against the pound.

“A 12 per cent currency headwind is sobering for companies which can’t grow in mature markets,” Chris Wickham, an analyst at Oriel Securities in London, said in an e-mail. — Bloomberg