British American Tobacco (BAT) is on track to meet earnings guidance for 2024 even though global industry volumes are expected to be 2% lower, with weakness in the US, France and Sudan offset by an improving outlook in Türkiye and Mexico.
The group said at the release of interim results yesterday that it anticipated low-single figure organic constant currency revenue growth for the year. It also forecast low-single figure organic adjusted profit from operations growth, including a .2% transactional foreign exchange headwind.
Capital expenditure in 2024 was expected to be about £600 million.
“We have made progress in enhancing financial flexibility, enabling the initiation of a sustainable share buy-back programme. Guided by our refined strategy, I am confident we will progressively improve our performance to deliver 3–5% revenue, and mid single digit adjusted profit from operations growth on an organic constant currency basis by 2026,” said the chief executive, Tadeu Marroco.
However, he said the lack of enforcement against illicit single-use vapour products in the US, compounded by the sale of their businesses in Russia and Belarus in 2023, meant that the group’s New Category product revenue was likely to be below a £5 billion ambition in 2025.
In the six months to June 30, 2024, basic earnings a share were up 13.9% to 201.1p driven by a £1.36bn gain recognised from the partial sale of the investment in ITC and a £590m credit related to the debt liability management exercise in the first half.
These more than offset the reduction in profit from operations, which was largely due to higher amortisation and impairment charges and from the sale, in the second half of 2023, of the group businesses in Russia and Belarus.
Basic earnings a share were also positively impacted by the reduction in the number of shares due to the share buy-back programme – 15 189 762 ordinary shares were repurchased in the six months ended June 30, 2024.
Excluding the impact of the sale of the businesses in Russia and Belarus and before the impact of foreign exchange, on an organic basis, adjusted diluted earnings per share were 1.3% higher at 177.7p.
In the US, BAT, revenue fell 6.7%, driven by 13.7% lower Combustibles volume, with the market down 10% due to macroeconomic pressures on consumer spending and lack of enforcement against illicit single-use vapour products.
“Our performance was further impacted by the investment in our commercial actions and phasing of wholesaler inventory movements … In Vapour, we maintained value share leadership of closed systems consumables in tracked channels,. The growth of illicit single-use vapes continues to negatively impact the legal market with industry volumes in rechargeable closed systems down 9% in the first half of the year,” BAT’s Marroco said.
Despite this, the Vuse brand delivered revenue in line with the prior year as pricing (+8%) offset lower consumables volume (down 8.1%), he said.
“We added 1.4 million consumers to 26.4 million of our Smokeless brands, now accounting for 17.9% of group revenue, an increase of 1.4 percentage points versus the 2023 financial year,” said Marroco. In the US, the smokeless brands include Vuse, Velo, Grizzly, Kodiak, and Camel Snus.
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