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BAT Remains Confident Of Growth Despite Regulatory Risk

By Dayeeta Das
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BAT Remains Confident Of Growth Despite Regulatory Risk

British American Tobacco acknowledged concerns about the threat of tighter regulation in the United States but said on Thursday it was confident it could still grow its business.

The changes, which could include a ban on menthol cigarettes it sells under the leading Newport brand, have contributed to its share price losing around half its value since May 2017.

'Regulatory changes'

"We recognise that the proposed potential regulatory changes in the US have created some investor uncertainty," said Chief Executive Nicandro Durante, who will step down in April.

"We have a long experience of managing regulatory developments, a track record of delivering strong growth while investing for the future and an established multi-category approach."

BAT, the second-biggest international tobacco company, reported higher full-year adjusted sales and profit helped by cigarette market share gains and growth in vaping devices.



The maker of Lucky Strike and Dunhill cigarettes forecast continued earnings growth this year.

It also set a medium-term target for revenue from 'new category' products, including e-cigarettes, tobacco heating devices and 'modern oral' snus, to grow five-fold to £5 billion(€5.84 billion) by 2023/2024.

Durante - who will be succeeded by Jack Bowles, chief operating officer of BAT's international business - forecast "another year of high single figure adjusted constant currency earnings growth" for 2019 and noted a board proposal to lift its dividend by 4%.

The company did not give a forecast for 'new category' products for 2019.


Analysts' Comment

Analysts at Hargreaves Lansdown noted that BAT faces a Canadian appeal court judgment on a smokers' class action damages suit, expected on Friday and which could saddle it with billions of pounds in compensation obligations.

"With debts still high ... the market will be waiting nervously on this judgment," they said.

The Results

For 2018, excluding the impact of currency fluctuations and the 2017 acquisition of Reynolds American, BAT reported adjusted revenue of £25.76 billion (€30.07 billion), up 3.5%.

On a reported basis, revenue was £24.49 billion (€28.59 billion).


Its adjusted earnings per share were 296.7 pence, up 11.8% on the same basis. Roughly 3 percentage points of the earnings growth was related to a US tax change.

Analysts on average had estimated revenue of £24.34 billion (€28.41 billion) and earnings per share of 290.55 pence, according to Refinitiv data.

The company also said its finance director, Ben Stevens, planned to step down.

He will be replaced on 5 August by Tadeu Marroco, the company's director of group transformation.

News by Reuters, edited by ESM. Click subscribe to sign up to ESM: European Supermarket Magazine.

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