British American Tobacco (BAT) has maintained its full year guidance, but revenue and profit both declined.
The tobacco and e-cigarette manufacturer reported that revenue fell by 8.2 per cent year on year to £12.3bn in the first half of 2024, as it was impacted by the sale of businesses in Russia and Belarus in 2023 and FX headwinds.
BAT said profit from operations declined by 28.3 per cent, with the operating margin down by 9.7 percentage points to 34.5 per cent.
In the first half of 2024, the company added 1.4 million new consumers to its smokeless brands, bringing the total to 26.4 million. Smokeless products now constitute 17.9 per cent of group revenue, a 1.4 percentage point increase from the full year 2023.
Revenue from new categories such as vapes and tobacco pouches dipped by 0.4 per cent, but increased by 7.4 per cent on an organic constant rate basis to £1.65bn.
Derren Nathan, head of equity research at Hargreaves Lansdown, said news that BAT is unlikely to meet its revenue target of $5bn next year from new categories “came as a disappointment”.
He said: “That’s where the company is pinning its future as volumes in the global tobacco industry continue to decline. It has notched up some wins with recent approvals for its Vuse Alto vape kit and tobacco flavoured consumables in the US, but a flood of illegal devices in the marketplace is holding back growth.”
BAT shares rose 1.8 per cent on Thursday morning after the company announced it had entered into an agreement with Goldman Sachs for a share buyback starting on 25 July 2024 and ending on 14 October 2024. In March, BAT launched its share buyback scheme funded by the recent partial sale of its stake in Indian business ITC.
Chief executive Tadeu Marroco said: “While there is more to do, we are making good progress and I am encouraged that our New Category launches and our first-half investments to strengthen our U.S. Combustibles portfolio are gaining traction. Together with the expected unwind of U.S. wholesaler inventory movements, I am confident this will drive an acceleration in our second-half performance.
“BAT is a highly cash generative business, and we are committed to continuing to reward shareholders with strong cash returns. 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 that 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,” Marroco added.