British American Tobacco eyes return to US growth after three years

Daily Mail​

2 days ago

British American Tobacco expects its US business to return to growth after three negative years, despite the growing threat of illegal vape products in the country.
The Rothmans and Lucky Strike manufacturer told investors US combustibles sales had rebounded, with its volume and value share increasing by 10 basis points each.
It also achieved strong trial and retention rates for its Velo Plus nicotine pouches, which launched in the US last December.
BAT does forecast a 'mid-teens' drop in first-half revenues from its Vuse e-cigarettes due to illicit product sales across North America.
The industry has been struggling with declining tobacco sales as consumers switch to cheaper brands or alternatives such as vapes, and as regulations tighten.
It is also being squeezed by sales of unauthorised, flavoured disposable vapes, sales of which amounted to around $2.4billion in the US in 2024.
BAT boss Tadeu Marroco said: 'The Vapour category remains impacted by the proliferation of illicit vapour products in the US and Canada.'
But the FTSE 100 firm, which also owns the Dunhill and Pall Mall cigarette brands, noted its first-half sales were 'slightly ahead' of previous guidance.
Consequently, it now expects full-year revenue growth of 1 to 2 per cent, along with a 1.5 to 2.5 per cent rise in adjusted profit from operations.
Marroco said the company's performance would likely be second-half weighted, largely because of the 'roll-out of new category innovations in key markets' from the middle of this year.
BAT and other tobacco businesses are investing substantial sums in non-combustible products amid a growing shift towards less harmful alternatives and tough regulation on the sale of tobacco brands.
It aims to have 50 million consumers using its smokeless goods, including vapes and tobacco heaters, by 2030 and earn at least half of its revenues from them by 2035.
In the last financial year, BAT achieved £3.4billion of revenue from new categories, equivalent to 17.5 per cent of its overall turnover.
Mark Crouch, market analyst at eToro, said: 'BATs investors don't seem put off by the long-term global decline in smoking rates and are instead placing their faith in BAT's transition to smokeless alternatives.'
However, he added: 'It's important not to overlook the scale of the challenge ahead for BAT.
'Combustible tobacco products still account for over 80 per cent of BAT's revenues, and the group's ambition to become 'smokeless' by 2035 raises questions about whether new categories can generate comparable returns.'
BAT's latest trading update comes a week after the London-based firm declared that it had sold a $1.5billion stake in Indian conglomerate ITC.
It plans to use proceeds from the sale, which still leaves it ITC's largest shareholder, on boosting its share buyback programme by £200million to £1.1billion.
British American Tobacco shares were 0.75 per cent down at 3,317p on Tuesday morning, although they have still grown by around 37 per cent over the past year.