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Highlights:
- Revenue and adjusted profit align with low-single-digit organic growth guidance.
- Profitability in non-tobacco products, such as vapes and nicotine pouches, continues to improve.
- The company reaffirms commitment to transitioning into a “smokeless” business by 2035.
British American Tobacco PLC (LSE:BATS) has reaffirmed its full-year guidance, highlighting a strong performance driven by accelerating profitability in its non-tobacco product segment. This focus aligns with its long-term goal of transitioning into a “smokeless” business by 2035.
Growth in Revenue and Profitability
The company reported revenue and adjusted profit for the year in line with its guidance of low-single-figure organic growth. Revenue growth in the second half of the year was particularly robust, propelled by targeted investments and strategic commercial actions in key markets, particularly the US.
Profitability in its new category products—including vapes, heated tobacco, and oral nicotine pouches—continued to gain momentum. British American Tobacco noted significant improvements in these segments, further solidifying its position as a leader in alternative nicotine solutions.
Innovation in New Categories
The company’s new categories focus on providing reduced-risk alternatives to traditional cigarettes. Chief Executive Tadeu Marroco remarked, “Our second-half performance acceleration is driven by the phasing of new category innovations, the benefits of investment in US commercial actions, and the unwind of wholesaler inventory movements.”
Modern oral nicotine products and heated tobacco devices have seen notable improvements in profitability, with British American Tobacco prioritizing higher returns on investments in these segments.
Financial Highlights
The company provided updated financial guidance, including:
- A foreign exchange headwind of approximately 4.5%.
- Net finance costs expected to be around £1.6 billion.
- Gross capital expenditure estimated at £600 million.
- Operating cash flow conversion anticipated to exceed 90%.
Strategic Focus and Outlook
British American Tobacco emphasized its commitment to innovation and targeted investments. “Our quality growth imperative is delivering higher returns on more focused investments across all three new categories, and that prioritization is already transforming our business in Europe,” Marroco added.
As the company progresses towards its smokeless vision for 2035, it continues to invest in new categories, catering to evolving consumer preferences and regulatory landscapes. The advancements in profitability and innovation position British American Tobacco to sustain its growth while transforming the future of its business.
