British American Tobacco (BAT) has said it will book a £25 billion impairment charge on some of its US cigarette brands.
Shares in the company slumped by as much as 8% in early trading on Wednesday as a result.
The Dunhill and Lucky Strike maker linked the charge to “the current macroeconomic headwinds impacting the US combustibles industry” and its long-term strategy to shift away from traditional cigarettes.
It added: “This accounting adjustment mainly relates to some of our acquired US combustibles brands, as we now assess their carrying value and useful economic lives over an estimated period of 30 years.”
It came as the business said revenue growth for the current year is set to be at the “low end” of its 3% to 5% guidance, amid pressure on the US market.
However, the firm hailed progress in it non-combustibles business, which covers key growth areas such as vaping and heated tobacco products.
Chief executive Tadeu Marroco said: “In 2023 we continue to expect another year of delivery in line with our guidance.
“I am encouraged by the strong performances of Vuse and Velo, delivering strong volume-led revenue growth, and increased profitability.
“In combustibles, while the US macroeconomic environment remains challenging, I am encouraged that our commercial plans are starting to deliver early signs of portfolio recovery.”
Derren Nathan, head of equity research at Hargreaves Lansdown, said: “Despite weak demand from smokers in the important US market, it’s managed to eke out a year of revenue growth, albeit at the lower end of previous guidance.
“Meanwhile, the rollout of new categories such as vapes, heated tobacco and oral pouches is continuing apace, with breakeven now expected in the current period, two years ahead of the original plan.
“Management now sees these products as the cornerstone of the company’s future, expecting them to deliver half of group revenues by 2035. But that’s a long way off.”
Enjoy the convenience of having The Sunday Post delivered as a digital ePaper straight to your smartphone, tablet or computer.
Subscribe for only £5.49 a month and enjoy all the benefits of the printed paper as a digital replica.Subscribe