Shares in British American Tobacco (BATS) were up nearly 3% to £26.92 as one of the world’s largest tobacco companies announced a 4.4% rise in revenue to £13.4 billion for the six months ending 30 June 2023.

Today’s rise in share price is in sharp contrast to its year-to-date performance with the shares experiencing a fall of nearly 20% as investors look to invest in higher growth businesses in the technology sector, and are put off by renewed pressure to clamp down on vaping from health industry bodies.

British American Tobacco has attributed the rise in revenue in part to the strong performance from its new categories business. Revenues for this division were up 29% to £1.65 billion in the six months ending 30 June 2023 and contributed a £201 million increase to group profit.

Operating profit increased 61.4% to £5.93 billion and the company said  profitability from its new category business is ‘on track’ for 2024.

Other highlights include strong revenue performance from vaping brand Vuse and tobacco free nicotine pouches Velo and Glo. The company also said there were plans to launch another tobacco heating product Glo Hyper X2 Air.

RESILIENT PERFORMANCE

Tadeu Marroco, the relatively new CEO of British American Tobacco who has been in his new role for 10 weeks said: ‘I'm pleased with the resilient performance of British American Tobacco in the first half of 2023 and the renewed sense of energy across the organisation.

‘It is a challenging external environment. High inflation and slower global growth are impacting consumers and business. Yet our revenue, profit from operations and earnings are all up.

‘I remain confident that new categories will deliver a positive contribution in 2024. However, we do not expect contribution growth to be linear, as levels of investment will align with the phasing of our big innovation platforms.’

ON TRACK FOR 2023

Although the global tobacco industry volume is expected to be down circa 3% partly due to the US, Pakistan uncertainty over the war in Ukraine, British American Tobacco expects organic constant currency revenue growth of 3%-5% and continued strong progress towards £5 billion new category revenue in 2025.

The company also expects mid-single figure constant currency adjusted EPS (earnings per share) growth with an expected foreign exchange headwind of 3% on the full year adjusted diluted EPS.

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