BRITISH American Tobacco, which has one of its major manufacturing plants in Southampton, is battling against a fall in sales.

The company yesterday said the tough global economy was having an effect on sales, but that first quarter profits were still on the increase.

The Lucky Strike-to-Dunhill group has seen sales fall as smokers switch to cheaper brands. Its four global brands, which also include Kent and Pall Mall, achieved overall growth of three per cent in the first three months of the year, but total group volumes slid six per cent.

BAT's Latin America markets were particularly badly hit by the tough economic conditions, with all markets except for Venezuela and the Caribbean seeing a decline in volumes.

In Argentina, volumes were lower and profits were halved as a result of the country's crisis.

Overall, group revenues for the first quarter slid from £6.13bn to £5.96bn. However, pre-tax profits were still able to inch ahead from £467m to £472m.

Chairman Martin Broughton said BAT was focusing on "shifting the mix of our business towards the growing and more profitable sectors".

Despite the overall sales slump, not all countries were hit by declining volumes during the first quarter.

In South Korea demand for Dunhill Lights drove a "substantial" increase in profits and volumes.

Vietnam, Cambodia and Bangladesh also showed "robust" growth in volumes, while higher margins in Australia, Malaysia and Pakistan helped boost profits.

In Europe, total profits were down £2m at £111m while regional volumes fell five per cent, mainly as a result of reductions in Russia and the UK.

BAT first said last December it expected volumes, which have also been hit by a clampdown on contraband, to be two or three per cent lower in 2002. The group then warned earlier this month that sales were running below forecasts.

However, BAT has remained confident volumes would start growing again in 2003.