TROUBLED tobacco group, BAT, still reeling after the DTI ordered an investigation into allegations it was involved in cigarette smuggling, has seen its profits hit by continuing tough US markets.

British American Tobacco said conditions in the US were ''very difficult'' and led to pre-tax profits in the three months to September 30 slipping to £511m, against £552m at the same point last year.

And on a nine-monthly measure, pre-tax profits were virtually static, at £1.22bn, against £1.21bn the time before, but revenues were up in that period to £7.13bn

The figures were revealed as the integration of the Rothmans business, bought by BAT for £13bn last year, isnearing completion.

The "integration" led to the closure of the Rothmans factory at Spennymoor where 460 were employed. The firm still retains factories in Darlington and Peterlee employing around 600.

Chairman Martin Broughton said more co-operation, rather than confrontation, was needed from regulators on drawing up anti-smoking legislation.

"More rapid progress could be made if regulators who are seriously interested in practical tobacco policy could come to see the tobacco industry as part of the solution, rather than as part of the problem," he said.

BAT has said it will co-operate fully with the DTI investigation, and Mr Broughton urged for firmer measures against the black market.

He added: "The increase in counterfeit goods around the world illustrates the consequences of harassing the major tobacco companies who actually represent the responsible part of the business."

The results were announced as workers at the Rothmans plant in Darlington continue their campaign to fight EU attempts to limit the tar level of cigarettes for export outside the EU.

Workers say the proposals could affect up to 70 per cent of the output at the factory.