BAT Expects Non-Traditional Cigarette Sales To Hit ￡1bn In 2018

Source from:  Financial Times 02/26/2018

British American Tobacco said it expects to double sales from vapour and other non conventional smoking products in 2018 as the owner of the Dunhill, Kent, and Lucky Strike cigarettes brands reported profits up 39 per cent last year.

The group said its earnings were boosted by the acquisition of Reynolds American (RAI) announced in July.

BAT is now the world’s largest ecigarette maker. Sales from the so-called next generation products contributed ￡397m last year — or around ￡500m based on a full year contribution from RAI.

Nicandro Durante, chief executive, said the company expects sales from the “potentially reduced-risk product” range to double to ￡1bn in 2018 and hit more than ￡5bn by 2022.

The company was reporting full-year results for the 12 months to December 31, with operating profits up from ￡4.6bn to ￡6.5bn, boosted by a six month contribution from RAI and helped by the weakness of sterling.

Sales rose 38 per cent from ￡14.7bn to ￡20.3bn, or ahead 2.9 per cent on an organic basis.

Profts, stripping out the effects of RAI, were up 3.7 per cent.

Earnings per share, adjusted to exclude the impact of the RAI deal, were up 9.9 per cent.

At ￡41.8bn the RAI acquisition is the largest ever seen in the tobacco industry, and the biggest deal done by a UK multinational in two decades.

The acquisition gives BAT the market leading vapour product in the US, the world’s largest market for ecigarettes.

Volumes of cigarettes and tobacco heating products were up 3.2 per cent. Stripping out RAI, volumes declined 2.6 per cent, but less than the overall market, which BAT estimates fell by 3.5 per cent.

Mr Durante said: “Our investments are now coming to fruition and, recognising that not all consumers are the same, we now have an unrivalled range of exciting and innovative products across the potentially reduced-risk categories — including vapour, THPs, oral tobacco, tobacco-free nicotine pouches and moist snuff.”
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