Cigarette maker British American Tobacco (BAT) yesterday raised its annual revenue growth guidance to above 5 percent for 2021 as the company enticed more customers to buy e-cigarettes and heating devices. Photo: Michaela Rehle / Reuters
Cigarette maker British American Tobacco (BAT) yesterday raised its annual revenue growth guidance to above 5 percent for 2021 as the company enticed more customers to buy e-cigarettes and heating devices. Photo: Michaela Rehle / Reuters

BAT raises annual profit guidance as it boosts e-cigarette sales

By Philippa Larkin Time of article published Jun 9, 2021

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CIGARETTE maker British American Tobacco (BAT) yesterday raised its annual revenue growth guidance to above 5 percent for 2021 as the company enticed more customers to buy e-cigarettes and heating devices.

The world’s biggest cigarette producer said the growth outlook was ahead of its predicted 3 to 5 percent guidance.

BAT, the maker of Lucky Strike and Newport cigarettes, said that it continued to extract costs, rationalise and simplify its combustible portfolio and strategic brands now only represented around two-thirds of its volume.

Chief executive Jack Bowles said this year was pivotal for the business, with accelerating new category revenue growth and a clear pathway to new category profitability by 2025.

“We are accelerating our transformation to build A Better Tomorrow,” Bowles said.

“We are creating brands of the future and sustainable value for all our stakeholders.”

BAT previously said that it aimed to transform into a high-growth, multi-category consumer goods business, with a purpose to reduce its health impact, driven by meeting evolving consumer needs.

Bowles said: “We are investing and building strong, fast-growing international brands in each segment, rapidly accelerating our reach and consumer acquisition, thanks to our digitalisation and our multi-category consumer-centric approach, supported by the right resources and products and our agile organisation.

“Our portfolio of non-combustible products is tailored to meet the needs of adult consumers. We are growing new categories at pace, encouraging more smokers to switch to scientifically substantiated reduced risk alternatives.”

The company’s reduced-risk and new-category products grew slowly at 15 percent taking up the slack in demand for combustibles.

“We added more than 1.4 million non-combustible product consumers in the first quarter, to reach a total of 14.9 million,” Bowles said. These products were now sold in 74 markets across 53 countries, driving strong growth in volume and value.

The group set future growth targets of £5 billion (R95.42bn) new category revenue by 2025, 50 million consumers of non-combustible products and carbon neutrality across it operations by 2030.

Of note in its new category segment, Vuse was approaching global leadership in vapour reaching 31.4 percent category value share in the top five vapour markets in April in the year to date, up 5.9 percentage points versus full year 2020 and was the first global carbon neutral vape brand.

BAT said this was testament to its long-standing commitment to being a responsible business.

The group said it saw a continuing recovery in emerging markets, but did not expect a recovery in global travel retail until next year.

Adjusted diluted earnings per share for the year were expected to increase at constant currency by mid-single digit, with a currency revenue growth of above 5 percent, as well as a strong operating cash flow conversion in excess of 90 percent.

BAT said it aimed to reduce its leverage to around three times adjusted net debt and adjusted Ebitda (earnings before interest, taxes, depreciation, and amortisation) by year end.

For combustibles, the cigarette maker saw continued value and volume share gains with strong pricing, but this was partially offset by geographic mix. Group cigarette volume was expected to be ahead of the industry, with full-year industry volume expected to be down 3 percent this year.

BAT shares fell 0.78 percent on the JSE yesterday to close at R535.50.

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