British American Tobacco, the world's No. 2 tobacco company, on Wednesday forecast sales of vaping and e-cigarette products to accelerate in the second half of the year and announced plans to consolidate the business into fewer brands.
The maker of Lucky Strike and Dunhill cigarettes flagged slowing global industry volumes, but forecast improved margins and further investments in its 'New Category' portfolio, which includes vaping and e-cigarette brands.
The business makes tobacco heating product 'glo' and 'Vype' e-cigarettes as well as snuff and nicotine pouches.
Tobacco firms around the world have been investing heavily in e-cigarettes and vaping products as demand for traditional cigarettes wanes.
BAT expects volumes in the United States, which makes up for more than a third of its sales, to decline 4-5%, above the 3.5-4.5% range it estimated earlier.
Its guidance comes just a day after rival Imperial Brands , another tobacco firm looking to diversify with its blu e-cigarettes, reiterated its guidance of a 4.5%-5% decline in US volumes for 2019.
Even Marlboro maker Philip Morris International Inc, the world's largest tobacco company, has flagged an industry-wide slowdown in cigarette volumes.
Credit Suisse analysts said BAT's forecast of a further decline in cigarette volume 'is not a surprise given the year-to-date decline in the US is over 5%, although (it) slightly questions management's 'feel' for the market.'
However, BAT reaffirmed its full-year targets, said first-half revenue growth for the 'New Category' business was approaching its annual target range.
The company said it expects revenue growth for the year at the business to be around the middle of the 30% to 50% range on a constant currency basis.