British American Tobacco (BAT) expects its first half revenue and adjusted profit from operations to be down by low-single digits.
However, it is on track to deliver its guidance of low-single digit revenue and adjusted profit from operations growth on an organic, constant currency basis in 2024, it said in a statement on Tuesday.
“As previously highlighted, we expect our performance to be second-half weighted, mainly driven by wholesaler inventory movements related to continued investment in our US commercial actions, as well as the phasing of new launches,” said CEO Tadeu Marroco.
“Our guidance also reflects ongoing macroeconomic pressures, particularly in the US market and continued lack of effective enforcement against the growing illicit vapour segment,” he said.
The group is investing to sustainably strengthen its US business, accelerate innovation momentum, and enhance capabilities that support its strategic delivery.
“These investments will set the business up for a stronger future. While there is still more to do, I am confident that our actions are working, and I am encouraged by our continued traction in US Combustibles, initial performance of glo Hyper Pro and enhanced consumables in early launch markets as well as the continued success of our non-tobacco range veo in Europe,” said Marroco.
He said the focus on quality growth is starting to drive accelerating returns on more targeted investments across all three new categories, particularly HP and Modern Oral.
“As a result, we expect to deliver further improvement in new category profitability for both the first half and full-year,” he said.
BAT continues to prioritise shaping a sustainable future and call for more appropriate regulation and enforcement of new categories, particularly in the US vapour market.
Marroco said BAT expects growing momentum in the second half, enabled by the investments it is making today.
“As we continue our journey towards building a smokeless world, guided by our refined strategy, 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,” he said.
He said US commercial actions were gaining traction and the group had made volume and value share gains in Americas and Europa and Asia Pacific, Middle East and Africa.
“As previously highlighted, we expect our first-half performance to be impacted by continued investment in our commercial actions and related phasing of wholesaler inventory movements, with the latter expected to unwind in the second half. We have now completed the majority of our previously announced commercial initiatives, which continue to gain traction,” he said.
Key markets driving first-half financial delivery include Germany, Romania, Pakistan and Mexico.
It said its e-cigarettes brand, Vuse, maintained global value share leadership at 41.1% in key markets, but noted that its financial performance will be impacted by the continued growth of illicit single-use vapes.
“We continue to call for more appropriate regulation and enforcement to tackle illicit products in the category, and we welcome signs of increasing action,” he said.
BAT is a highly cash generative business, and it expects to deliver operating cash flow conversion in excess of 90% again in 2024, it said.
In March, it completed the monetisation of a 3.5% portion of its ITC stake, enabling the initiation of a sustainable share buyback, starting with £700m in 2024 and £900m in 2025.
For full-year to end-December 2024 the company expects the global tobacco industry volume to be down about 3%.
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