Global tobacco market expected to shrink by 3% this year: BAT
British American Tobacco has told shareholders it expects a decline in the global tobacco market to accelerate due to the Ukraine war.
Russia’s invasion of Ukraine means the global tobacco market is expected to shrink by 3% this year, BAT said. Past predictions put the fall at 2.5%.
“As previously announced, given the continuing conflict in Ukraine, we are working towards transferring our Russian business in full compliance with international and local laws,” said chief executive Jack Bowles.
“Our priority remains the safety and wellbeing of our people in Ukraine and across the wider region.”
“In addition, this conflict is increasing global uncertainty and disruption, further exacerbating inflationary pressures on supply chains, impacting consumer consumption and resulting in increased finance costs.”
But BAT stuck to its guidance for this financial year, saying revenue will row between 2% and 4%.
It has not noticed any “accelerated downtrading” – customers swapping more expensive brands for cheaper cigarettes – so far this year.
“While we are not immune to these pressures, we are confident in delivering on our current financial targets, irrespective of the timing of the transfer of our Russian business,” Mr Bowles said.
“This is thanks to our well-established multi-category strategy, our strong portfolio of global brands and our resilient, highly cash generative business.”
The business said it has cut losses from its new categories business, which includes vaping and heated tobacco.
This is where many investors see the future of the tobacco giant. Both revenue and volume sales grew in the category, and it invested £1 billion in the products over the first half of the year, BAT said.
“Our new category business is increasingly contributing to group performance, and we are confident in delivering our £5 billion new category revenue and profitability targets by 2025,” Mr Bowles said.