BAT reported a 5.9 percent increase in adjusted operating profit to £5.21 billion. File Image: IOL

DURBAN – The share price of British American Tobacco (BAT) surged by more than 8 percent on the JSE after the cigarette and tobacco manufacturing company released its interim results, boosted by its new product range that includes e-cigarettes and tobacco heating devices. 

The share price gained 8.66 percent on the JSE on Thursday and closed at R556.79. 

Chief executive Jack Bowles, who was appointed to the role in April and was presenting his first set of results, said: “Our New Categories portfolio continued to deliver encouraging growth. While there is much more to be done, with new product launches planned for the second half of the year and the impact of a full year of additional investment, we expect revenue growth to accelerate in the second half of the year.”  

BAT, the second-biggest tobacco group in the world, which includes its vaping, snuff, oral nicotine and e-cigarette brands, reported a 5.9 percent increase in adjusted operating profit to £5.21 billion (R90.17bn), at constant rates for the six months to June, supported by growth in all of its regions. 

The group, with brands Lucky Strike and Dunhill, said adjusted diluted earnings per share increased by 7.1 percent to 149.3 pence a share, at constant rates. 

Adjusted net debt stood at £45.53bn at the end of June.

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Adjusted revenue increased by 4.1 percent to £12.14bn, with revenue from new categories increasing by 27 percent to £531 million, with volume growth across all categories. 

Bowles said in 2019 the group was on track to increase its revenue in new categories to be around the middle of its guidance range of 30 to 50 percent growth a year, excluding the impact of translational foreign exchange.

Tobacco Heating Products – including glo, Neo sticks and hybrid products, increased its revenue by 4 percent to £301m, driven by Japan, South Korea and Russia. 

Tobacco firms have been investing heavily in new products as demand for traditional cigarettes declines.

“As we create a stronger, faster, more agile organisation and deliver enhanced value growth from our  combustibles business, our adjusted operating margin grew 110 basis points, alongside the significant increase in investment in new categories. We continue to generate cash and we maintain our guidance of deleveraging by 0.4 times, excluding the effect of currency movements on our reported results,” Bowles said.

BAT said total cigarette and THP volume declined in line with the industry, down 3.5 percent to 336 billion sticks. 

Nico von Stackelberg, an analsyst at Liberum, an investment banking, research, sales and trading company, said in a note that BAT exceeded expectations in all regions except Asia-Pacific and the Middle East.

Liberum said pricing remained robust.

BUSINESS REPORT