BATS British American Tobacco Plc

By Joe Hoppe

British American Tobacco expects a one-off impairment of $31.5 billion this year due to pressure on some of its traditional cigarette brands in the U.S., as it shifts focus to smokeless products.

The FTSE 100 cigarette maker--which houses the Kent, Dunhill and Lucky Strike brands among its portfolio--said macroeconomic pressures on its traditional cigarette business performance in the U.S. and investments in its noncombustibles business would lead to an accounting noncash adjusting impairment charge of around GBP25 billion.

It said the adjustment mainly relates to some of its acquired U.S. cigarette brands, and it will now assess their carrying value and useful economic lives over an estimated period of 30 years. It plans to start amortization of the remaining value of its U.S. cigarette brands from January.

The brands being written down include Newport, Pall Mall, Camel and Natural American Spirit, a company spokesperson confirmed.

The company attributed the slump in U.S. sales to economic challenges, as some customers switched to cheaper, nonpremium brands, and a rise in illegal disposal vapes. It said it expects these headwinds to persist into 2024.

Global tobacco volumes are forecast to slump 3% in 2023, the company added.

BAT said it plans to generate up to 50% of its revenue from noncombustibles by 2035, covering products like vapes and tobacco-free nicotine pouches, and would continue to invest in the sector into 2024.

On the back of the strategy shift and U.S. pressures, it expects low single-digit growth in revenue and adjusted profit from operations on an organic basis for the upcoming year.

It then expects a progressive improvement to 3%-5% revenue growth and mid single-digit adjusted profit from operations by 2026.

"I am confident that the choices we are making today will drive our long-term success and deliver sustainable value for all of our stakeholders," Chief Executive Tadeu Marroco said.

For this year, the company said it expects revenue growth at the low end of its previously guided 3%-5% range at constant currency. It further expects mid single-figure adjusted diluted earnings per share growth on a constant-currency basis, including around a 2% transactional foreign-exchange headwind.

It reported strong volume and revenue growth in new categories, which it expects to be broadly breakeven, two years ahead of schedule.

Shares at 0952 GMT were down 197.5 pence, or 7.9%, at 2,290.5 pence.

Write to Joe Hoppe at joseph.hoppe@wsj.com

(END) Dow Jones Newswires

December 06, 2023 05:22 ET (10:22 GMT)

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