6th Dec 2023 10:03
(Alliance News) - British American Tobacco PLC on Wednesday warned of headwinds in the US amid the proliferation of illicit products, but the Kent maker expects earnings to come in line with its 2023 guidance.
It also set out a tepid growth outlook for outer years, however, and announced it will book a sizeable impairment.
The London-based maker of tobacco and other nicotine products expects to achieve a mid-single rise in constant currency adjusted diluted earnings per share for 2023.
However, organic revenue is now expected at the low end of its 3% and 5% guidance range at constant rates.
Shares in BAT shed 7.6% to 2,298.00 pence each in London on Wednesday morning. In Johannesburg, they lost 7.4% to ZAR548.08.
BAT predicts global tobacco industry volume will fall 3% this year.
But the company projects strong new category revenue growth amid incremental investment. It expects New Category to be broadly breakeven in 2023, two years ahead of its original target.
New Categories includes new innovative products like vapour, other tobacco products, and Modern Oral, which involves Lyft, Velo and other modern white snus.
BAT Chief Executive Officer Tadeu Marroco is encouraged by the strong performances of Vuse and Velo, delivering strong volume led revenue growth, and increased profitability.
Marroco said the company is committed to become a predominantly smokeless business, with 50% of its revenue from non-combustibles by 2035.
Only 10% of the world's 1 billion smokers use New Category products, Marroco said.
The CEO said in the US, the Dunhill and Rothmans producer still faced a challenging macroeconomic environment and the continued proliferation of illicit modern disposables, which continued to hit combustibles industry volume in the second half of the year.
In Americas & Europe, Asia Pacific, Middle East & Africa BAT expects to deliver another strong revenue and profit, driven by the strength of its "well-balanced" portfolio of global brands.
Looking further afield, it set out a commitment to "building a smokeless world". It eyes 50% of its revenue to stem from non-combustibles by 2035.
BAT added: "Looking forward, we expect accretive New Category growth and stable combustible revenue to continue to drive total nicotine industry revenue growth. This underpins our medium-term guidance where we expect a progressive improvement to a 3-5% revenue and mid-single digit adjusted profit from operations growth, on an organic basis at constant rates by 2026."
As part of its "smokeless world" aim, and the tough US macroeconomic outlook, BAT said it will book a hefty impairment of GBP25 billion.
"This accounting adjustment mainly relates to some of our acquired US combustibles brands, as we now assess their carrying value and useful economic lives over an estimated period of 30 years. Accordingly, we will commence amortisation of the remaining value of our US combustibles brands from January 2024.
By Artwell Dlamini, Alliance News reporter
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