BAT banks on growing demand for vapes and nicotine pouches
British American Tobacco has raised its forecast for revenue from smoking alternatives as it pivots away from traditional tobacco products.
The FTSE 100 cigarette maker said its ‘New Categories’ business, which includes nicotine pouches and vapes, had made progress, with revenue growth expected to be in the mid-teens percentage range, a slight upgrade to its previous forecast.
BAT has been shifting its focus away from cigarettes and towards alternative products to keep up with changing habits and increasing regulation. It aims to be ‘predominantly smokeless’ by 2035.
Smokeless products made up around 18 per cent of the group’s total revenues last year, with the rest coming primarily from its cigarette brands, including Dunhill and Lucky Strike.
British American Tobacco aims to be ‘predominantly smokeless’ by 2035
The group said today that the growth in smokeless alternatives had been driven by its nicotine pouch Velo, which had delivered ‘excellent’ revenue growth, and vape brand Vuse.
The US continued to deliver across both traditional and alternative tobacco products.
It comes ahead of a change to the regulator’s enforcement on unauthorised nicotine products in the US, with BAT looking to roll out new versions of its vapes and pouches.
BAT maintained its full-year forecast, with revenues expected to grow at the lower end of its target range of 3 to 5 per cent. Adjusted profits are forecast to increase between 4 and 6 per cent.
Global cigarette volumes are expected to fall by 2.5 per cent this year – ahead of a previous forecast of 2 per cent.
BAT chief executive Tadeu Marroco confirmed the group’s revenues should enable the completion of its £1.3billion share buyback programme and progressive dividend policy.
He said: ‘I am pleased that our full-year delivery remains firmly on track. We are continuing to drive good momentum, and are confident in our ability to sustainably deliver our mid‑term algorithm and strong cash returns for shareholders.’
Shares fell 3.1 per cent to 4,439p in early trading.
Adam Vettese, market analyst at eToro, said: ‘The market has honed in on the less flattering bits, a faster 2.5 per cent decline in global cigarette volumes and continued weakness in heated tobacco.
‘With profits still weighted towards H2 and some FX headwinds, investors appear to be taking profits after a decent run. Income investors could view today’s weakness as a chance to top up rather than a reason to sell.’
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