British American Tobacco’s share price surges despite massive write-off

Signage is pictured on the front of the headquarters quarters of British American Tobacco at Temple Place in central London. File photo: AFP

Signage is pictured on the front of the headquarters quarters of British American Tobacco at Temple Place in central London. File photo: AFP

Published Feb 9, 2024


British American Tobacco’s (BAT) share price increased 6.1% on the JSE yesterday after it reported a financial performance in line with guidance, and in spite of a non-cash £27.6 billion (R659bn) impairment charge.

Revenue fell 1.3% for the year ended December 31, 2023, but was up 3.1% at constant rates, driven by the groups’ New Categories products. The group loss from operations came to £15.751m, impacted by the non-cash impairment charge which mainly related to the acquisition of US combustibles brands. The dividend grew 2% to 235.52 pence.

The share traded at R691.30 yesterday afternoon, slightly below R645.00 a year ago on the same day.

In the US the growth of illicit single-use vapour products and uncertainty around a potential menthol ban contributed to reasons for the impairment charge.

CEO Tadeu Marroco said in a statement, “We are investing to strengthen our US business, accelerate innovation momentum, and enhance capabilities that support our strategic delivery. We expect these investments, together with the US macroeconomic pressures, will impact 2024.”

New Categories, such as vaping products, achieved profitability in 2023 two years ahead of original target and contributed a £398 million increase to group profit, at constant exchange rates.

Total Combustibles organic revenue increased 0.6%, with organic price/mix of +6.1% offset by lower volume and geographic mix due to macro-economic pressures in the US impacting the premium segment.

There were strong performances from AME (Asia and Middle East) and APMEA (Asia Pacific, Middle East, Africa).

The group settled with Philip Morris International (PMI), which resolved all ongoing patent infringement litigation between the parties related to Heated Products (HP) and Vapour products.

Adjusted organic profit from operations was up 3.9% at constant exchange rates.

“New Categories delivered volume-led revenue growth and increased profitability, driven by Vuse and Velo,“ he said.

In combustibles, commercial plans in the US were enabling early signs of portfolio recovery.

“We will progressively build to deliver 3-5% organic revenue, and mid-single digit adjusted organic profit from operations growth by 2026 on a constant currency basis. We are committed to continuing to reward shareholders with strong cash returns throughout this period,” said Marroco.

“I am pleased with the progress made across each of our key focus areas in 2023,” he said. A key part of their Dynamic Business pillar was financial flexibility, disciplined capital allocation and strong shareholder distributions.

“We remain committed to our 25-year track record of consistent dividend growth, rewarding our shareholders through all economic cycles,” said Marroco.

Over the next five years, around £40bn of free cash flow was expected to be generated before dividends, he said.

The group had been working for some time on completing the regulatory process required to monetise some of its shareholding in ITC, an Indian consumer goods giant.