British American Tobacco projects strong year despite US vaping slowdown
British American Tobacco (BAT) said today it expected a strong 2019, despite being hit by a slowdown in the US vaping markets amid a health scare and regulatory crackdown.
The cigarette-maker, which owns brands such as Lucky Strike, Camel and Rothmans, said it expected a “strong financial performance on an adjusted basis” in a pre-close trading update.
Read more: US vaping deaths hit growth at Imperial Brands
BAT said revenue growth in its new category, which includes e-cigarettes, was expected to be at the lower end of its range of 30-50 per cent, “reflecting the recent slowdown in the US vapour market”.
Overall, the company said it expected constant currency adjusted revenue growth in the upper half of its 3-5 per cent guidance range.
It also forecast constant currency adjusted operating profit growth in the upper half of its 5-7 per cent guidance range.
BAT shares rose half a per cent to 3,000p this morning.
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Chief executive Jack Bowles said: “We expect to deliver a strong performance in 2019, building on the good progress we made in the first half.”
Bowles said he expected the “issues around vaping in the US” to lead to a “better and stronger regulatory environment in which we are well placed to succeed”.
In the US there has been a series of reports in recent months linking deaths and respiratory illnesses to vaping products.
Some US states have temporarily banned e-cigarettes in reaction to the health scare, retailer Walmart decided to stop selling e-cigarettes and Apple has removed all vaping-related apps for its app store.
In September, Imperial Brands said its vaping business would fall short of expectations after a “marked slowdown” in the sector.
Richard Hunter, head of markets at Interactive Investor, said: “BAT is on course for a significantly better year, after an exceptionally difficult 2018 which saw 49 per cent wiped off its share price.
“In particular, despite various challenges, the US market is performing strongly. Given that the region is responsible for over 40 per cent of group revenues, success on the other side of the pond is critical to the company’s fortunes.
“There has been a slowdown in the US vaping market, however, with Presidential comments suggesting that the outright banning of e-cigarettes is rather more than just a possibility. This is not to say that BAT will necessarily be directly affected, since its products are generally not those in the firing line of the US authorities, but nonetheless the moves of the regulators is an ongoing warning shot to the tobacco industry in general.”