British American Tobacco puffs out a decent second half
British American Tobacco is continuing to perform well with trading in line with expectations, it said in its pre-close trading update for the second half of the year on Wednesday.
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The FTSE 100 cigarette giant said it remained confident of another year of good earnings growth at constant currency, with continued market share growth, driven by its ‘global drive brands’.
It said second half organic operating profit growth would reflect the benefit from the phasing of volume shipments, offset by a more difficult pricing environment in some markets, addin that the Reynolds American integration was on track, with the businesses performing strongly, driven by good share growth and pricing.
Full year earnings per share would also benefit from a reduced currency translation tailwind of 5%, the board explained.
“Second half organic volume is expected to benefit from the phasing of shipments in a number of key markets, including Pakistan, partly offset by the impact of the significant excise increase in the GCC,” the British American Tobacco board said in its statement.
“We anticipate full year industry volume to be down around 4%, with BAT again outperforming the industry, driven by continued good share growth.”
Organic revenue in the second half had benefited from growing next-generation product revenues and good overall pricing in most markets, although organic price mix was expected to moderate in the second half due to downtrading in the GCC and a more difficult pricing environment in some markets, notably in Russia.
Full year organic price mix was expected to remain within historic ranges.
“Trading in our markets continues to reflect the trends discussed at the interim results in July and our more recent capital markets day, with Canada, Germany, Romania, Bangladesh and Ukraine performing well and conditions remaining challenging in Russia, GCC, Brazil, South Africa and Malaysia.
“The national rollout of glo in Japan is complete and glo has continued its excellent performance with national share now at 2.7%,” the board added.
“glo has also been successfully launched in Canada, Switzerland, South Korea and Russia and is now available in a total of five countries.”
In vapour, BAT said its share in Western Europe was continuing to grow, and the performance of VUSE in the US remained “strong”.
On the topic of foreign exchange, British American said that if exchange rates remained unchanged for the balance of the year, the translational currency tailwind would be expected to be 6% on operating profit.
“The transactional headwind remains around 2% on operating profit,” the board said, adding that “full year earnings per share [are] expected to benefit from a translational foreign exchange tailwind of 5%.”