British American Tobacco on Track for FY24 Guidance Amid Strategic Investments

3 min read | December 11, 2024 06:37 PM AEDT | By Team Kalkine Media

British American Tobacco on Track for FY24 Guidance Amid Strategic Investments — Image source: shutterstock

On Track to Meet FY24 Guidance

BAT’s performance for FY24 is expected to align with the company’s guidance, showcasing resilience in a challenging global market. The second half of the year is projected to see accelerated revenue growth, attributed to innovation in New Categories, the benefits of first-half investments in U.S. commercial actions, and inventory management improvements.

The company anticipates stronger revenue growth in both New Categories and Combustibles in H2 compared to the first half. This momentum underscores BAT’s strategic focus on quality growth and efficient reinvestment to enhance profitability in emerging markets.

Strengthening New Categories and Innovation

Innovation in New Categories remains a cornerstone of BAT’s growth strategy. By focusing on quality growth, BAT has achieved improved profitability in this segment. The company continues to reinvest in smart initiatives that align with shifting consumer preferences toward reduced-risk products.

The introduction of innovative products in H2 is expected to contribute significantly to BAT’s financial performance. By fostering a diverse product portfolio, the company is well-positioned to capitalize on evolving market trends.

Financial Stability and Operational Highlights

BAT has maintained robust financial stability, with cash conversion exceeding 90%. The company expects leverage to end 2024 at the higher end of its 2.0-2.5x target range, partially impacted by the strengthening U.S. dollar.

Technical guidance for FY24 includes:

A 2% decline in global tobacco industry volumes.
Low-single-digit organic revenue and profit growth in constant currency.
Adjusted profit from operations facing a 4.5% headwind from translational FX.
Net finance costs estimated at £1.6 billion, subject to FX and interest rate fluctuations.

BAT also projects gross capital expenditure of approximately £600 million in 2024, with continued focus on operating cash flow conversion above 90%.

Progress on Canadian CCAA Settlement

BAT has expressed optimism regarding the proposed Canadian Companies’ Creditors Arrangement Act (CCAA) settlement, which forms part of the mediator’s and monitor’s plan of arrangement. The company remains hopeful of achieving a resolution that benefits all stakeholders, further solidifying its commitment to regulatory compliance and corporate responsibility.

Looking Ahead

As BAT drives innovation and adapts to evolving market conditions, it continues to position itself for sustainable long-term growth. With strategic investments in New Categories and a strong focus on operational efficiency, the company remains confident in meeting its FY24 targets.

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