Dividend fails to light up BAT
• Analysts say shares are down due to a possible perception that bottom line might have been short of expectations
Cigarette group British American Tobacco (BAT) failed to light up market sentiment on Thursday despite dividends for the year to end-December increasing 15% to £1.95 a share and a blazing outlook for the group’s new products for smokers.
Cigarette giant British American Tobacco (BAT) failed to ignite market sentiment on Thursday despite dividends for the year to end-December increasing 15% to £1.95 a share and a blazing outlook for the group’s new products for smokers.
BAT shares weakened 5.86% to R683.90 in intraday trade before recovering to close 4.31% down at R695.22.
Market watchers said there was nothing in particular in the results to spook the market, other than perhaps a perception that bottom line might have been slightly short of expectations.
Revenue for the year was up 38% to £20.3bn after the acquisition of Reynolds America, with earnings about 10% higher at £2.84 a share.
BAT CEO Nicandro Durante said BAT’s investments were coming to fruition and the company boasted a range of newera products in the “reducedrisk categories”, such as vapour, tobacco-heated products, oral tobacco, tobacco-free nicotine pouches and moist snuff.
BAT was confident of leading the new-generation products category, he said, pointing out that these products generated £397m in revenue.
If Reynolds America’s contribution was included on a fullyear basis the new-generation products revenue would have topped £500m. “We expect this to double in 2018 to £1bn, rising to more than £5bn in 2022.”
The growing importance and progress of potentially reducedrisk products had allowed BAT to establish a new portfolio of priority brands under the strategic portfolio umbrella, he said.
The portfolio comprised its “existing global-drive brands” (Kent, Dunhill, Lucky Strike, Pall Mall and Rothmans) combined with Reynolds America’s “strategic brands” (Camel, Newport and Natural American Spirit).
“Also included is our portfolio of potentially reduced-risk products, including our key oral tobacco brands and new-generation products brands in vapour and tobacco-heated products.”
Combustible cigarette products remained at the core of its business, Durante noted. He said the group’s cigarette market share in its key markets continued to grow strongly. It was up 40 basis points.
Total group cigarette and tobacco-heated products volume grew 3.2% to 686bn, outperforming the industry, which was estimated to have declined by about 3.5%.
BAT had an exciting nextgeneration product offering and a broad strategy to target the vapour and tobacco-heated products segments, Dirk van Vlaanderen, associate portfolio manager at Kagiso Asset Management, said.