British American Tobacco (BAT) reported at its half-year earnings results that total revenue dipped 8.2%, however, revenue from smokeless products grew 1.4% to make up 17.9% of group revenues versus fiscal year 2023. The tobacco company said organic revenue was down 8.2% at constant rates. This was due to investment in U.S. commercial actions and negative effect of wholesaler inventory movements.
Despite these headwinds, BAT CEO Tadeu Marroco expressed optimism regarding the second half of the year.
“Guided by our refined strategy, I am confident that we will progressively improve our performance to deliver 3-5% revenue, and mid-single digit adjusted profit from operations growth on an organic constant currency basis by 2026,” he said.
Turning to the United States, the London-based company highlighted its progress in new categories, including vapor product Vuse, from BAT’s subsidiary R.J. Reynolds Vapor Co., Winston-Salem, North Carolina.
“We welcome the FDA’s marketing authorization for our Vuse Alto device and tobacco flavor consumables, demonstrating that marketing these products are appropriate for the protection of public health,” Marroco said. “However, the continued lack of enforcement against illicit single-use vapor products in the U.S., compounded by the sale of our businesses in Russia and Belarus in 2023, means that new category revenue is likely to be below our £5 billion [$6.4 billion] ambition in 2025.”
Earlier this month, the FDA issued marketing granted orders for seven e-cigarette products from R.J. Reynolds Vapor Co. They are the Vuse Alto Power Unit and six Vuse Alto tobacco-flavored pods, which are sealed, pre-filled and non-refillable. The company expanded its vapor portfolio with a new nicotine- and tobacco-free vapor product called Sensa and also submitted its supplemental premarket tobacco product application (PMTA) to the FDA for its Vuse Pro age-gated device.
In U.S. combustibles, which BAT defines as cigarettes and other tobacco products, the U.S. combustibles industry volume was down 10% or 9.5% on a sales to retail basis. This was due to several factors, BAT said. The U.S. combustibles industry volumes remain under pressure, “largely driven by macro headwinds and the continued lack of effective enforcement against illicit single-use vapor products,” Marroco said.
While there is more to do, he said BAT is making good progress.
“I am encouraged that our new category launches and our first-half investments to strengthen our U.S. combustibles portfolio are gaining traction,” he said. “Together with the expected unwind of U.S. wholesaler inventory movements, I am confident this will drive an acceleration in our second-half performance.”
Marroco said that the company's first half of the year performance is in line with BAT’s expectations. “We are on track to deliver our full-year guidance,” he said.
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