British American (BATS) Shares Plunged 9.4% on a £25Bn Charge

The British American Tobacco Plc ADS (LON: BATS) share price plunged 9.39% after releasing its pre-close and strategy update for the fiscal year 2023. In a strategic update for 2023, the company confirmed its full-year earnings per share (EPS) in line with guidance, with New Categories like Vuse and Velo driving volume and revenue growth.

The contribution from these New Categories is expected to break even two years ahead of schedule. The company is experiencing robust growth in the AME and APMEA regions, showcasing the resilience of its global multi-category strategy. 

However, macroeconomic pressures in the U.S. are affecting the performance of combustible products, leading to an expectation of organic revenue growth at the lower end of the 3-5% guidance range.

The company is now committed to “Building a Smokeless World,” aiming for 50% of its revenue to come from non-combustibles by 2035. This shift aligns with the vision of “A Better Tomorrow^TM” and involves steering smokers towards better nicotine products.

The company acknowledges the significant growth potential in New Category products, which currently have only 10% of the world's 1 billion smokers as users.

In 2023, the company will recognise a non-cash impairment charge of approximately £25 billion, mainly related to the adjusted value of its acquired U.S. combustible brands. This is part of the shift towards a predominantly smokeless business model. 

Investments in 2024 are planned to accelerate this transformation and secure long-term sustainable growth despite expectations of continued macroeconomic pressures in the U.S.

The company reports strong global leadership in the Vapour category with Vuse and increasing profitability in the Modern Oral category with Velo. However, glo's performance in Heated Products has been below expectations, affected by slower industry growth and competitive activity.

Financially, the company remains cash-generative and expects to reach its targeted leverage range soon. Strategic efforts include enhancing financial flexibility and rewarding shareholders through solid cash returns and a progressive dividend policy.

The company is refining its strategic direction to ensure long-term profitable growth and value creation. This includes driving innovation, making active choices for transformation, and incremental investment in 2024 to support these goals.

British American Tobacco (BATS) share price. 

The British American Tobacco (BATS) share price plunged 9.39% to trade at 2256.3p from Tuesday’s closing price of 2490.0p.