- Total revenue for six months £13.4 billion
- Pre-tax profit for six months £5.3 billion
- Shares up 3% year-to-date
British American Tobacco (BATS) said it was on track to deliver full year 2024 guidance of low-single digit revenue and profit growth with a second half weighting, which disappointed investors.
The company highlighted a challenging macro environment in the US and ‘stretched’ consumers with combustibles industry volume down circa 9% year-to-date.
The announcement came as the tobacco firm reported pre-tax profit of £5.30 billion for the six months to 30 June 2023.
The shares were down marginally at £24.07 in morning trading, and are up over 3% for the year.
NEW CATEGORIES
It was not all bad news as there was a strong performance from its cigarette brand Lucky Strike which is one of the ‘fastest growing combustibles brands in the US.’
New Categories also performed well with some ‘phasing in of innovation’, with strong revenue and profit growth from Velo and Vuse - the later maintained global value leadership at 41.1% of key markets.
The tobacco firm said its cash position remained strong while net debt to EBITDA (earnings before interest, tax, depreciation, and amortisation) is expected to be within the narrow range of two to 2.5 times by year end 2024.
The company also said it would launch a sustainable share buy-back which should please existing shareholders.
EXPERT VIEW
Russ Mould, investment director at AJ Bell said: ‘British American Tobacco continues to struggle in the US thanks to consumers buckling under the pressure of high interest rates which has impacted spending decisions, together with the rise of illegal vapes. The company even had a little dig at the authorities for saying there is ‘continued lack of effective enforcement’ against illegal vapes.
‘With the US tobacco and vape industry undergoing a shift in normal buying patterns, it’s only natural for wholesalers to change their ordering habits and that’s hurt British American Tobacco.
‘At the same time, the company is investing in the US to strengthen its longer-term position, meaning it will have to lean more on other geographic regions to drive profits near-term.
‘Additional headwinds present a longer-term problem for the group. Governments are increasingly anti-smoking and anti-vaping despite the tax income these products generate.’
DISCLAIMER: Financial services company AJ Bell referenced in this article owns Shares magazine. The author of this article (Sabuhi Gard) and the editor (Martin Gamble) own shares in AJ Bell.
