LONDON (AP) — British American Tobacco PLC said it agreed to buy a Danish cigarette business in a deal worth $3.9 billion — its second purchase in less than a week — as it reported a 12-percent increase in full-year profits yesterday.

BAT, the maker of the Dunhill, Kent, Lucky Strike and Pall Mall brands, also launched a five-year cost-cutting plan it says will save £800 million ($1.6 billion) annually by 2012.

The results exceeded analysts' expectations and the savings drive was at the top end of forecasts. But its shares fell 1.2 percent to 1,916 pence ($38.13) after initially rising yesterday in London.

"At a time of considerable economic and financial uncertainty around the world, British American Tobacco is in good shape," said chairman Jan du Plessis.

BAT, which is the world's second-largest tobacco group after Altria Group Inc. and sells cigarettes in more than 180 countries, posted net profit for 2007 of £2.13 billion ($4.2 billion), up from £1.9 billion in 2006.

Revenue rose three percent to £10 billion ($19.9 billion). Sales of its Kent brand were particularly strong, up 19 percent on increased popularity in Russia, Chile, Romania and Ukraine.

Its purchase of the privately held Skandinavisk Tobakskompagni's cigarette business will give the company 60 percent of the market for cigarettes in Scandinavia and save the company £60 million ($118.9 million) annually by 2011.

Under the deal, BAT will exchange its 32.35-percent stake in ST and pay £1.15 billion ($2.3 billion) in cash.

"This transaction turns our minority stake in a diversified business into full control of a very profitable cigarette business with strong market positions," said chief executive Paul Adam.

The deal comes less than a week after BAT announced it had won an auction for Turkey's state-owned cigarette maker Tekel with a $1.7 billion bid. That deal is expected to raise BAT's market share in Turkey from just over seven percent to 36 percent.

The European tobacco industry has been consolidating, with multinationals combining to create economies of scale as sales decline in Western European markets.

BAT's British rival Imperial Tobacco Group PLC recently bought Franco-Spanish rival Altadis SA for £12 billion, while Japan Tobacco completed its $15 billion takeover of Britain's Gallaher Group.