9th Jun 2020 08:12
(Alliance News) - British American Tobacco PLC said Tuesday it is performing "well" despite the "very challenging" backdrop and remains committed to its 65% dividend pay-out policy.
The London and Johannesburg-listed tobacco firm said it continues to see "good" pricing and "strong" volumes, with "good" share growth across all its three new categories - vapour, tobacco heating and modern oral.
"We have made a good start to the year, with strong volume and value share growth in combustibles underpinning the sustainability of the business," Chief Executive Jack Bowles said.
BAT expects the global industry cigarette and tobacco heating product volumes to be down about 7% in 2020, but expects its own cigarette volume to be ahead of the industry. In the year to date, BAT's cigarette volumes are up 5%, with value share improving 2%.
In developed markets - which accounts for 75% of group revenue - the company has seen "strong" results with "continued good" pricing. BAT said there has been "little evidence" of downtrading, with a particularly strong performance in the US.
In emerging markets, however, BAT noted the coronavirus pandemic has had a "more pronounced" negative effect. The company pointed to the South African government's ban on tobacco sales continuing longer than expected as hurting sales.
As a result, BAT now expects about a 3% headwind to constant currency revenue in 2020 from the pandemic. The tobacco firm is now guiding for constant currency adjusted revenue growth between 1% to 3%, down from previous guidance of 3% to 5% growth.
In 2019, constant currency adjusted revenue totalled GBP25.68 billion.
BAT is also guiding for a mid-single figure growth in 2020 constant currency adjusted diluted EPS versus 321.6 pence in 2019.
New Categories business is "performing well", the company said - particularly noting "encouraging early results" from tobacco heating products.
"Covid-19 has disrupted consumer activation plans, reducing overall industry growth rates in New Categories. It has also led to the scaling back or postponement of some launches, as well as causing supply disruption and out-of-stocks earlier in the year. While the vapour category continues to recover following the global slowdown in the second half last year, the US market remains below historical levels," BAT added.
The tobacco firm said it plans to continue its investment in New Categories and is still targeting GBP5 billion revenue, but has extended the target date top 2025 from 2023-2024 previously.
Bowles said: "Our purpose is clear, we are committed to Building a Better Tomorrow. This includes our potential vaccine for Covid-19, under development at our US bio-tech subsidiary, Kentucky BioProcessing, which has demonstrated its ability to generate an immune response in pre-clinical testing and is poised to move to clinical trials".
"Our focus on becoming a faster, simpler, more agile business through Project Quantum has positioned us well for continued delivery in the current environment and these efforts have ensured we are a highly resilient company," Bowles added.
BAT shares in London were down 2.6% at 3,044.50p each. In Johannesburg, the stock was down 2.7% at ZAR665.89 each.
By Paul McGowan; [email protected]
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