Why Cigarette Company British American Tobacco Shares Are Diving Today

British American Tobacco PLC BTI shares are trading lower by around 9% after it reported a pre-close trading update.

BAT expects to incur an accounting non-cash adjusting impairment charge relating to some U.S. cigarette brands of around £25 billion ($31.50 billion).

The company will commence amortization of the remaining value of its U.S. combustibles brands from January 2024. 

BAT said it is making active investment choices to strengthen its U.S. business, accelerate momentum in Heated Products globally, and enhance capabilities supporting strategic delivery.

In the U.S., macroeconomic pressures and the continued proliferation of illicit modern disposables have continued to impact the combustibles industry volume in the second half of the year, with recent signs of premium segment pressure after a more stable first half, BAT said.  

Meanwhile, BAT said outside the U.S., its combustibles business has continued to perform well.

The company said it continues to witness strong volume and revenue growth in New Categories, led by Vuse and Velo in 2023.

The company's global volume share in combustibles is flat YTD 2023, with value share down 40bps, owing to the impact of its commercial actions in the U.S., partly offset by stronger performances in AME and APMEA. 

BTI anticipates 100% operating cashflow conversion in 2023, projects to attain the middle of its guided 2x-3x adjusted net debt/adjusted EBITDA leverage range, and expects to be around 2.7x by year-end. 

For 2023, the company expects organic revenue to be at the lower end of its guidance range at constant rates of 3%-5%.

Related: British American Tobacco Leaves Russia And Belarus; Reaffirms FY23 Outlook

BTI projects an improvement to 3%-5% revenue growth and mid-single-digit adjusted profit from operations growth on an organic basis at constant rates by 2026.

The company targets to derive 50% of its revenues from non-combustible products by 2035.

Also Read: Beyond The Smoke: Evaluating British American Tobacco Resilience As Industry Shifts

Price Action: BTI shares are down by 8.83% at $28.76 on the last check Wednesday.

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