BAT maintains revenue and profit forecasts; bets on vaping demand

British American Tobacco (BAT), owner of Dunhill, Kent and Lucky Strike cigarettes and smoke free brands Vuse, glo and Velo, has released a trading update on Tuesday ahead of its half-year results.

The company maintained its annual revenue and profit forecasts, targeting 3-5 per cent organic constant currency revenue growth and mid-single digit adjusted earnings per share growth.

However, reported revenue growth would be impacted by the timing of the transfer of its Russian and Belarusian businesses, which is expected to close in 2023.

BAT said its performance would be weighted towards the second half, betting on steady demand for its vaping and oral nicotine products and higher prices.

The company said the number of consumers of non-combustible products grew by 900,000 in the first quarter, but growth in the US combustibles market staggered.

Group cigarette volume share was up 0.1 percentage points and value share down 0.4 percentage points, mainly due to a weak performance in the US.

“Our performance in US combustibles has been disappointing,” newly appointed chief executive Tadeu Marroco said in a statement.

“We are taking action, and while it will take some time to carefully and thoroughly implement our plans, our volume share has grown sequentially since the start of the year.”

The company said it has extended Vuse’s global leadership, with value share up 2.8 ppts, reaching 38.8 per cent in key Vapour markets.

Heated tobacco brand glo has had an underwhelming start to 2023, but has shown performance improvement. The glo category volume share was down 1.1 ppts to 18.2 per cent in key markets.

The company has recently launched the glo Hyper Air platform in four key European markets, with further roll-outs planned for the second dhalf.

Velo remains Modern Oral volume share leader in 15 European markets, with Velo volume share of Total Oral up 70 bps, while volume share of Modern Oral was down 1.8 ppts to 28.5 per cent in key markets mainly driven by the US.