British American Tobacco puts pressure on share with cut in its revenue expectations
DURBAN – The share price of British American Tobacco (BAT) slid more than 5 percent in intraday trade after the group said yesterday that it had cut its adjusted revenue expectations for the year due to the Covid-19 outbreak, despite a good performance during the first half. The share hit a low of R631.33.
The tobacco giant said yesterday that it was expecting its adjusted revenue to increase by between 1 and 3 percent, on constant currency basis, down from the earlier expected growth of between 3 and 5 percent.
BAT had performed well in the developed markets, including the US, which contribute 75 percent of the group’s revenue.
“Results in developed markets are strong, with continued good pricing, little evidence of accelerated downtrading to date and a particularly strong performance from our business in the US, which has been highly resilient throughout the Covid-19 crisis,” the group said.
BAT anticipated a full-year headwind of 3 percent in adjusted revenue from the pandemic, this despite its strong performance in the developed markets.
Given these factors, growth this year would be slower, as BAT continued to invest more in New Categories and make further progress towards its £5 billion (R106bn) revenue ambition.
“We now anticipate reaching the £5bn target in 2025 from the previous expected 2023-24,” the group said.
BAT had also experienced closures and lockdown measures in some countries in the emerging markets, including South Africa, Mexico and Argentina.
“In South Africa there are still no signs of the Covid-19 related tobacco sales ban being lifted,” the group said.
The Fair Trade Independent Tobacco Association wants the ban on tobacco sales declared irrational and unlawful.
The difficult trading conditions in different markets has prompted the group to downgrade its growth for adjusted diluted earnings per share (Eps) to a mid-single figure compared with its previous high-single figure growth.
The group planned to continue paying 65 percent of adjusted diluted Eps in dividends.
Chief executive Jack Bowles said BAT had made a good start to the year, with strong volume and value share growth. “Our purpose is clear, we are committed to Building a Better Tomorrow. This includes our potential vaccine for Covid-19 under development at our US biotech subsidiary, Kentucky BioProcessing, which has demonstrated its ability to generate an immune response in pre-clinical testing…”
BAT shares fell 4.19 percent to close at R638 on the JSE on Tuesday.