RPT-UPDATE 1-BAT Q1 volumes edge up 0.7 percent

* Underlying Q1 cigarette volumes up 0.7 pct
* Economic climate and currency headwinds make trading challenging LONDON, April 26 (Reuters) - British American Tobacco , the world's No 2 cigarette maker, reported a 0.7 percent rise in underlying first-quarter volumes, driven by growth in its major brands in a challenging global trading environment.

 The London-based group, which makes Kent, Dunhill, Lucky Strike and Pall Mall cigarettes, said on Thursday that overall group volumes rose 1.3 percent to 166 billion cigarettes while price rises pushed underlying revenues up 6 percent. Chief Executive Nicandro Durante said the group achieved good growth in revenue, with continued pricing momentum, but currency headwinds had adversely affected results. "It is a strong start to another year of anticipated good earnings growth," he said in a first-quarter trading update.

 BAT, the most globally spread of the big tobacco groups, said although there were indications that industry volume decline was moderating, the unsettled economic climate and currency headwinds continued to make trading challenging. Its top four brands (ie the four above) saw volumes rise 6 percent, led by Lucky Strike which was up 26 percent following strong growth in Germany, Spain, Poland, France and Chile.

 BAT, which made 705 billion cigarette last year, has seen smoking levels decline in Western Europe and North America, but has offset this by pushing up prices and seeing growth in emerging markets like Brazil, Mexico, Romania and Russia. The 0.7 percent rise in BAT's first-quarter underlying volumes compared with a 0.4 percent fall in 2011, while the world's biggest cigarette group and Marlboro-maker Philip Morris reported a 5.3 percent Q1 volume rise earlier this month.