Pall Mall and Lucky Strike owner British American Tobacco (BAT) said today its shift to smokeless products was yielding strong results as it waited for further updates on its legal action in Canada.
In a trading update, the company confirmed it would deliver full-year results in line with guidance, as trading in the second half had grown in line with expectations.
British American Tobacco is currently holding out for a conclusion to negotiations over a five-year legal process that has involved its subsidiary Imperial Tobacco Canada Limited obtaining creditor protection under the Canadian Companies’ Creditors Arrangement Act.
The cigarette manufacturer’s full-year results for 2024 are due in February, where it said there would be “more clarity” on the ongoing Canadian litigation.
Shares in British American Tobacco stock price hit a two-high at the end of November as investors started to buy into the group’s shift away from traditional tobacco products such as cigarettes.
“[The results] have seen the firm use cost cuts and price increases so it can offset falling stick volumes and still generate fat profits and copious cash flow,” said Dannis Hewson, AJ Bell’s head of financial analysis.
The company has been increasingly pivoting towards vapes and the oral market in recent years in an attempt to pull away from the slowly dwindling number of smokers.
“We continue to make progress towards our ambition of becoming a predominantly smokeless business by 2035,” said British American Tobacco chief exec Tadeu Marroco.
“We are making further progress increasing profitability across new categories, and I am particularly pleased with the improvements in heated products and modern oral.”
However, British American Tobacco also reported a nine per cent drop in US industry volumes since the start of 2024, which it credited to “continued macro-economic pressures and the impact of illicit single-use vapour products”.
“In the past five years, cash flow has comfortably covered the dividend and actually done so by an ever-wider margin, despite the ongoing decline in stick volumes,” added Hewson.