British American Tobacco shares increase despite swing to loss of £17.1bn

08 February 2024 , 09:35

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British American Tobacco has posted an annual loss of £17.1bn (Image: PA Media)

British American Tobacco (BAT), the company behind Lucky Strike and Dunhill, has reported an annual loss due to a higher-than-expected charge on its US operations.

The cigarette and vape firm saw a pre-tax loss of £17.1 billion in 2023, down from profits of £9.3 billion in the previous year following a £27.3 billion reduction in the value of its US brands. This was greater than the predicted £25 billion negative impact announced in December.

Due to their long-term plan to shift from traditional cigarettes, along with a dip in sales amid a wider economic downturn and the growth of illicit single-use vapour products and uncertainty around a potential menthol ban in the US, this hefty charge was incurred. Currency changes also contributed to the increased charge.

BAT predicts that global tobacco industry sales volumes will fall by about 3% this year, but it stands by its previous guidance for "low single digit" organic revenue and underlying earnings growth for this year. Despite plans from the Government to ban disposable vapes and all-cigarette generations, BAT's chief executive Tadeu Marroco says the company doesn't anticipate any financial impact on its UK business.

He said that the writedown is "unique" to the US and largely tied to its acquisition of the remaining 57.8% of Reynolds American for 49 billion US dollars (£39 billion) back in 2017. Mr Marroco stated that the forthcoming disposable vape ban in the UK, which is aimed to reduce vaping among young folks and safeguard children's health, wouldn't greatly affect their group.

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The sales from their Vuse Go brand, a disposable vape product, makes up between 42% and 50% of their UK vaping business, which accounts for approximately half of all UK sales. He said that they are leading in the UK's refillable vapes market, which is expected to increase demand after the ban on disposables.

"Because we have a modest share (in disposable vapes), we would be in a stronger position, because we are leaders in refillable," Mr Marroco explained. The company achieved profitability earlier than expected in their so-called new categories arm - led by Vuse and Vue. The company's shares increased by 5% during Thursday's morning trading.

Lawrence Matheson