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Gallaher 1st-Half Profit Gains 17% on Eastern Europe (Update3) 

Gallaher Group Plc, the maker of Benson & Hedges cigarettes in Europe, said first-half profit rose 17 percent as the company sold more tobacco in eastern Europe and former Soviet countries.

Net income increased to 185 million pounds ($350 million), or 28.1 pence a share, from 158 million pounds, or 24.2 pence, a year earlier, the Weybridge, England-based company said today in a statement. Profit was expected to be 181 million pounds, according to the median estimate of five analysts surveyed by Bloomberg.

European tobacco makers have sought to expand beyond western Europe, where smoking bans, rising prices and health warnings are curbing consumption. Gallaher has boosted market share in nations such as Russia and Kazakhstan, and bought Liggett-Ducat Ltd., Russia's No. 1 cigarette maker, in 2000.

Former Soviet nations were ``once again the star performer for Gallaher,''

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