‘Resilient’ BAT beats expectations in first-half results

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Pall Mall cigarettes are piled during the manufacturing process in the British American Tobacco Cigarette Factory (BAT) in Bayreuth, southern Germany, April 30, 2014. REUTERS/Michaela Rehle/File Photo

British American Tobacco reported stronger-than-expected first-half profit on Friday, as consumers bought more vaping products and higher-priced cigarettes in the US, its biggest market.

The Dunhill and Lucky Strike cigarette maker said consumption in the US was “resilient” with the company increasing its share of the US cigarette market by 30 basis points in the first half of the year.

Newport and Natural American Spirit cigarettes were among the top performers in the US, Chief Marketing Officer Kingsley Wheaton said, adding that revenue from e-cigarettes such as Vuse grew 75 per cent in the first half.

Investors have kept a close eye on the US, where BAT makes about 50 per cent of its total profits before taxes from cigarettes. A spike in COVID-19 cases in the past few months has raised fears that fewer people would venture out to buy cigarettes.

However, Wheaton said the US showed a “very strong performance”, with 3 million more consumers trying BAT products since the start of the year.

“BAT is in an elite group of resilient businesses who have been able to grow sales, earnings and cash flow during the challenging COVID-19 period,” Liberum analyst Nico von Stackelberg wrote in a note.

On Friday, BAT said total cigarette and tobacco heating product volumes declined 6.3 per cent, slightly better than the consensus forecast for a 6.5 per cent drop, mainly due to COVID-related disruptions in markets such as South Africa and Mexico.

Adjusted earnings per share (EPS) rose 5.7 per cent to 157.8 pence, while revenue rose 0.8 per cent to £12.27 billion in the first half. Both were higher than analysts’ forecasts for EPS of 154.5 pence and revenue of £12.20 billion, according to Refinitiv Data.

The London-based company also kept its forecast for full-year adjusted revenue growth and EPS in constant currency.