Gallaher Group PLC, Britain's second largest tobacco company, said first half profit rose 17 percent as the company benefited from rising sales in eastern Europe.

Net income rose to 185 million pounds, from 158 million pounds in the same period a year earlier, the company said in a statement. Sales rose 2.1 percent to 4.03 billion pounds.

Gallaher, which makes brands such as Mayfair and Silk Cut in Britain, has been expanding into eastern Europe to maintain sales growth as western European governments increase taxes on cigarettes, impose bans on smoking in bars and restaurants and more people give up the habit.

Gallaher made good progress in the first half of the year, in spite of challenging conditions created by additional taxation and increased price competition in some European markets, the company said.

The company raised its interim dividend 5.7 percent to 11.2 pence a share.

Shares of Gallaher were flat at 905 pence on the London Stock Exchange.