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British American Tobacco optimistic of delivering annual outlook

Popularity: British American Tobacco estimated around 3.2 million more people started using its non-combustible supply in the first nine months of 2022

British American Tobacco’s shift to vapes and other ‘new category’ products is accelerating as sales increase

  • BAT expects revenue growth of 2-4% at constant exchange rates this year
  • The company owns the Lucky Strike, Rothmans and Dunhill cigarette brands
  • He estimated that the total customer base for his “new category” products was 21.5 million.

British American Tobacco maintained its guidance for the full year following continued growth in demand for non-tobacco products.

Chief executive Jack Bowles told investors the blue-chip company was on track to steadily increase its adjusted operating margins, despite significant inflationary pressures in its supply chain, thanks to prices higher and brand-wide.

For the current year, the company also expects revenue growth of 2-4% at constant currencies, alongside a “mid-single digit” increase in adjusted diluted earnings per share.

Popularity: British American Tobacco estimated around 3.2 million more people started using its non-combustible supply in the first nine months of 2022

Popularity: British American Tobacco estimated around 3.2 million more people started using its non-combustible supply in the first nine months of 2022

BAT has sought to stimulate demand for its “new categories” in recent years, while reducing reliance on traditional tobacco products.

It estimated that around 3.2 million more people started using its non-combustible offering in the first nine months of 2022, bringing the total customer base in that market to 21.5 million.

The popularity of the flagship Vuse brand has been driving much of this growth, expanding its value share to more than a third in all five major Steam territories, including the United States, where it is the market leader in 35 states.

Market leadership was maintained by the modern oral brand Velo in 15 European countries thanks to strong demand for nicotine pouches.

However, volume share in the five largest modern oral markets fell 4.1 percentage points from the previous year due to a weaker performance in the United States, where the group decided to give priority to investments in the steam sector.

Tobacco volumes in the United States came under increased pressure due to the normalization of consumption habits and the spike in fuel prices caused by the easing of Covid-19 restrictions and the invasion of Ukraine by Russia.

Bowles said, “To offset early signs of an accelerating decline in industry trade in the second half of the year, we recently activated trade plans on specific brands, channels and states.”

BAT’s revenue is still entirely dependent on the sale of cigarettes from brands such as Lucky Strike, Rothmans and Dunhill, as it has yet to make a profit on its new categories arm due to heavy investment in marketing and sales. R&D.

Profits were also hit this year by the decision to suspend operations in Russia, where the group controlled about a quarter of the local tobacco market.

In March, he announced that he would “quickly transfer” the Russian business, although he did not provide any further update today on the progress of it.

Shares of British American Tobacco were down 2.4% at 3,328.5p by mid-morning on Thursday, although their value was well ahead of the broader FTSE 100 index by around 26 percentage points.

Head of Markets at Interactive Investor Richard Hunter: “BAT is in a changing industry and is leading its own race into the new world.

“As the industry recognizes the longer-term need to reduce addiction to traditional tobacco, moving into the area of ​​fast-growing ‘new category’ products, the signs from BAT are encouraging.

“The group is confident of achieving its target of £5 billion in revenue by 2025 and at the same time transforming the unit into profitability… the group’s established scale and cash generation bring the target closer .”

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