- Shares fall 8% to £31 in early morning trading
- £900 million share buyback planned in 2025
- Full year revenue down 5.2% but in line with expectations
Shares in British American Tobacco (BATS) took a turn for the worse in early morning trading as the FTSE 100 tobacco giant reported a 5.2% fall in revenue to £25.8 billion for the year ending 31 December.
The stock fell 8% to £31, although it is still up by more than 25% on a one-year view. The company blamed the sale of its businesses in Russia and Belarus in September 2023 and ‘translational FX (foreign exchange) headwinds.’
British American Tobacco also anticipates a charge of £6.2 billion in relation to the proposed settlement in Canada over a long-running lawsuit.
In 2015, a Quebec court ordered British American Tobacco, Philip Morris (PM:NYSE) and Japan Tobacco (2914:TYO) to pay compensation to smokers for health problems.
A MIXED BAG
It was not all unwelcome news for the company behind cigarette brands Dunhill, Kent, and Lucky Strike as it announced a £900 million share buyback ‘planned in 2025’ and dividend growth of 2% to 240.24p.
Revenue for New Categories which includes heated products, modern oral (pouches) increased by £251 million or 2.5% on an adjusted organic, constant FX basis.
The company however is falling behind some of its peers when it comes to vapes and e-cigarettes products sales despite CEO Tadeu Marroco’s commitment to building a smokeless world and ‘becoming a predominantly smokeless business by 2035’.
Marroco said: ‘In 2025, while we expect significant regulatory and fiscal headwinds in Bangladesh and Australia to impact our combustibles performance, I am confident that we will progressively build on our delivery as we shift from investment to deployment and we remain committed to returning to our mid-term guidance of 3-5% revenue and 4-6% adjusted profit from operations growth on a constant currency in 2026.’
'HURDLE DELIBERATELY SET LOW'
Rae Maile, research analyst at Panmure Liberum said: ‘Results for 2024 were in line but the hurdle was deliberately set low. Growth from this lower base will be limited this year as the company continues its attempt to shake off the Bowles-era.'Russ Mould investment director at AJ Bell said: ‘At a headline level the company posted a profit for 2024 but a big write down in Canada meant this was still a messy set of numbers.
‘The company has a big job on its hands to restore its existing business to a decent level of performance, never mind achieving a complete transformation of the company. For now, CEO Tadeu Marroco is likely to be judged on getting the basics right rather than anything more ambitious.’
DISCLAIMER: Financial services company AJ Bell referenced in this article owns Shares magazine. The author of this article (Sabuhi Gard) and the editor (Tom Sieber) own shares in AJ Bell.
