BRITISH American Tobacco has blamed the strong pound for a three per cent slump in profits in the first quarter of the year.

The tobacco group is in the process of shedding jobs at its Darlington plant.

It said weakness in nearly all of its key currencies had offset a five per cent improvement in volumes to 192bn cigarettes.

The trading performance was driven by the impact of acquisitions made in Italy, Serbia and Peru during last year, coupled with three per cent growth in BAT's frontline brands, particularly Kent, following strong demand in Japan and Russia, and Pall Mall after the brand achieved ''outstanding results'' in Italy.

Chairman Martin Broughton, who is due to leave the company for British Airways in the summer, said: ''We expect our real momentum to continue, although these results clearly demonstrate the extent to which good progress can be masked by the impact of the strength of sterling on the translation of our profit."

Earlier this year, BAT announced a 26 per cent fall in annual profits to £1.57bn as it faced higher restructuring costs - including the closure of its Darlington plant - and losses on the sale of operations.

BAT also completed the £1.63bn acquisition of Ente Tabacchi, of Italy, and announced a deal to merge its US business with RJ Reynolds.

The company also incurred one-off costs of £437m last year.

The Darlington factory will close at the end of June. A spokeswoman said that 279 workers had left the company or transferred to another site, and that 212 workers remained.