British American Tobacco (BAT) is confident of delivering on its 2022 guidance to shareholders, as it accelerates its “A Better Tomorrow” transformation process, CEO, Jack Bowles, said yesterday.
The group, in a pre-close trading update for the second half of its 2022 financial year, said yesterday that it was achieving strong volumes, revenue and market share from its new category business, and this segment had become a “significant contributor to group performance”.
New categories comprises tobacco heating products (THP), vapour and modern oral.
BAT’s share price slipped 3.17% to R691.94 yesterday afternoon, in spite of the favourable trading statement.
New product launches and innovations and geographic expansion had enabled the addition of another 3.2 million consumers within the non-combustible franchise in the first nine months, reaching 21.5m.
“We are investing in new categories, driving sustainable growth, while making excellent progress to reduce operating losses. We expect growing contributions across all new categories, and all regions in 2022. We are confident in delivering our targets of R5 billion revenue, and profitability by 2025,” Bowles said.
In the combustibles business, mainly cigarettes, a robust performance by the portfolio of brands was expected across Asia Pacific and the Middle East, Americas, sub-Saharan Africa and in Europe, driven by resilient volumes.
In the US, industry volumes were under pressure due to macro-economic factors and post-Covid normalisation of consumption patterns.
Commercial plans across specific brands, channels and states had been activated to offset early signs of accelerated downtrading in the second half of the year.
The business remained highly cash generative, “and in 2022 we expect another year of operating cash conversion well ahead of our 90% target”.
Net finance costs were expected to increase given the recent speed and significance of global interest rate rises and currency volatility, and the group would benefit from a 90% fixed debt-profile and an average maturity of over 10 years,” said Bowles.
The guidance for the 2022 year included 2% to 4% revenue growth, mid-single figure adjusted diluted earnings per share growth at constant currency, including a transactional foreign exchange headwind of 2%.
Full year global tobacco industry volumes were expected to be -2% versus -3% previously, driven mainly by the continued post-Covid recovery in emerging markets.
BUSINESS REPORT