The maker of Lucky Strike and Dunhill cigarettes revealed in February that it slumped to an annual loss after taking a hit to its US business
Investors are looking for British American Tobacco (BAT) to provide an update this Tuesday that will show it’s progressing in its pivot towards smoking alternatives amid the propect of possible smoking bans in the UK and US.
In a February announcement, BAT disclosed a fall into annual losses, citing a blow to its US operations. The tobacco giant, known for brands like Lucky Strike and Dunhill, had anticipated writedowns on some of its US brands due to falling smoking rates, reduced sales from the cost-of-living crisis, and a strategic shift from traditional cigarettes.
Despite the challenges, the FTSE 100 firm predicts only a slight increase in revenues for this year compared to the previous one. Derren Nathan, head of equity research at Hargreaves Lansdown, said: “British American Tobacco’s full year guidance of low single-digit growth in both revenue and operating profit may seem unambitious.”
He added that the future of the company relies on strong pricing strategies and the growing popularity of next-generation products like vapes to maintain positive financial momentum. BAT continues to focus on “reduced-risk” offerings, including its Vuse vape, Glo e-cigarette, and Velo oral nicotine pouches, with vape user numbers reaching approximately 11.5 million last year, bolstered by the rise of disposable vapes.
The newer product category is profitable for BAT and it is targeting making half of its revenues from the non-traditional cigarettes by 2035. Investors could be looking for more clarity on Tuesday after the company flagged uncertainty around a potential menthol cigarette ban in the US, which make a large proportion of the country’s cigarette market.
The proposal has faced setbacks with government officials recently missing a deadline to make a final ruling. Meanwhile, it is facing a potential new Bill in the UK which would ban young people smoking cigarettes, vapes and other products.
But a smoking ban will not be enforced before the UK holds a General Election on July 4, meaning it could fall into the hands of a potential new government to put into place. Labour has previously said it remains committed to the policy. BAT stressed earlier this year that it was not expecting a financial impact to the UK business of the generational smoking ban and a ban on disposable vapes.
