BAT plunges nine per cent after announcing £25bn hit
British American Tobacco will take a £25bn impairment charge on its balance sheet next year as a result of downgrades to the value of its traditional tobacco businesses.
The firm said ‘macro-economic headwinds’ had forced it to reassess the 30-year value of its brands. Shares dropped over 7.8 per cent at the opening bell on Wednesday before trading down as much as 10 per cent later in the day.
The news came in a trading update this morning which also revealed the firm had hit break-even on its ‘new categories’ such as heated tobacco and vapes.
Richard Hunter, head of markets at interactive investor said, while the £25bn write-down has zero affect on trading performance, “it is nonetheless a stark reminder of the switch which needs to be made to different products as consumer tastes change and as regulation becomes a higher hurdle to jump.”
BAT has said 50 per cent of its revenue will come from non-combustible products such as vapes by 2035.
In the update to markets, chief executive Tadeu Marroco said: “To accelerate the next phase of our transformation journey, we are now committing to ‘Building a Smokeless World’.
“We will deploy our global multi-category portfolio to actively encourage smokers to ‘Switch to Better’ nicotine products, realising the multi-stakeholder benefits of ‘A Better TomorrowTM‘.
“With only 10% of the world’s 1 billion smokers currently using New Category products2, the long-term opportunity for growth as we deliver on our transformation is vast,” Marroco added.
In a strategic update, BAT said it is now focused on delivering fewer but bigger “operational priorities” and driving a more collaborative and inclusive culture as it looks to become a “more agile and modern BAT”.
BAT also said it expects to deliver full-year results in line with guidance, with three to five per cent constant currency revenue growth, despite macro-economic pressures and the rise of illicit disposable vapes piling on its US smoking business.
It comes as Prime Minister Rishi Sunak recently announced a proposal to raise the legal smoking age so that way that a 14-year-old today would be unable to legally buy cigarettes in their lifetime.
He is also considering banning disposable vapes.