New finance boss for BAT in hazy climate
British American Tobacco (BAT) has named a new finance director, continuing a management overhaul as it confronts a tougher US regulatory landscape and competition in smoking alternatives.
Finance chief Ben Stevens will be succeeded by Tadeu Marroco in August, following the planned retirement of CEO Nicandro Durante in April.
The latest move came as the company reported full-year sales in line with analysts’ expectations but failed to stem investors’ concerns about its outlook. BAT says it is confident in its ability to manage proposals by the US Food and Drug Administration to restrict sales of flavoured e-cigarettes and ban menthol cigarettes.
However, other challenges loom, including the appeal of a class-action court case in Quebec in Canada involving smokers who said they were never warned of the risks. A ruling is expected on Friday.
The company also pushed back a target for revenue of £5bn ($6.7bn) from next-generation products to 2023/2024 from 2023.
That raised questions about the growth of the business, Morgan Stanley analyst Richard Taylor said in a note.
“The market grew a little slower in Japan last year so we pulled back on our target for this year, but the good news is that the market has started growing there again,” Stevens said.
BAT expects next-generation products, for which Japan is a key market, to grow 30%-50% globally per year.
As Jack Bowles prepares to succeed Durante as CEO, BAT has refocused investments in cigarette alternatives to counter tightening regulation and growing competition from the likes of Philip Morris’s IQOS and industry upstart Juul Labs.
Revenue from heating products, which do not actually burn tobacco, nearly doubled in 2018.
The tobacco maker sees big growth in smoking alternatives, in which it has invested $2.5bn of research funds. It plans to roll out existing products to more markets and launch new devices. The Vype iSwitch pen could be sold across the UK this year after a test launch in London, Cleverly said.
A possible US ban on menthol cigarettes, which make up about 30% of the US market, could hit BAT hard because it is the market leader in that segment. New restrictions on flavoured vaping products, meanwhile, could affect Juul more severely.
“The regulations aren’t going to get in our way as much as people think,” Durante said. “When menthol was banned in Canada in 2017, we didn’t see an impact in consumption.
“People just moved from menthol to non-menthol products.” / Bloomberg