25th Apr 2019 12:13
LONDON (Alliance News) - The chair of British American Tobacco PLC said Thursday the cigarette giant remained in "good shape" for further earnings growth in 2019, as it continued to perform well.
Speaking at BAT's annual general meeting, Chair Richard Burrows explained that the London and Johannesburg-listed firm was doing well thanks to its "established strategy that focuses on a multi-category approach, and which enables us to continue to deliver shareholder returns today while investing in our future."
Burrows emphasised the firm continued to "perform very well." Nonetheless, the company was "very conscious" of the negative sentiment from investors around the firm related to potential US regulatory headwinds.
In November, shares in BAT sank nearly 10% when reports emerged that the US Food & Drug Administration was considering a ban on menthol cigarettes. BAT has a large exposure to this market through its dominant Newport brand.
"I am, however, confident that the business is in good shape and that the causes of these concerns in fact present significant opportunities for future growth," Burrows asserted. "Our core combustible business continues to outperform the industry; we have established a successful and fast growing potentially reduced risk product business, and our US acquisition - which has a long track record of managing regulatory change - is now fully integrated."
Burrows emphasised that its potentially reduced-risk products - which includes its vaping and heat-not-burn products - saw a near-doubling of revenue in 2018.
"These are early stages in our PRRP journey, and as technology and innovation increasingly play a role in our business, our product pipeline will continue to expand," Burrows said. "In 2018 we filed 130 patents and expect that number to nearly double this year."
Burrows highlighted, however, that the "bulk" of its revenue and profit will still be derived from its traditional combustible cigarette and tobacco business for "many years to come". This will continue to fuel shareholder returns as well as investment in its new product portfolio.
All told, BAT expects to deliver "another year of good earnings growth" in 2019.
Shares in BAT were 1.9% lower at 2,985.50 pence on Thursday in London, 0.9% lower at ZAR565.01 in Johannesburg.
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