BAT writes down value of US cigarette brands by £ 25bn

BRITISH American Tobacco said it would write down the value of some its US cigarette brands as more smokers quit, switch to cheaper brands or adopt smoking alternatives.

The maker of Lucky Strike cigarettes and Vuse vapes said it would take a non-cash impairment charge of around £25 billion (US$31,5 billion) related to its stable of US cigarette brands.

BAT also said it expects 2023 organic revenue growth at the low end of its 3 percent-5 percent forecast at constant currencies. For 2024, the cigarette maker forecast low-single-digit revenue and adjusted profit from operations growth, on an organic basis at constant currency rates.

The shares fell as much as 6,2 percent in early London trading. The stock is down about 29 percent this year, triple the decline in Marlboro maker Philip Morris International.

BAT’s US cigarette business has struggled as consumers look for cheaper or less harmful alternatives. The company, which also makes Velo nicotine pouches, said its alternative products business should break even in 2023 and be profitable in 2024.

Sales of alternative products will account for about half of sales by 2035. That’s about a decade behind a similar goal from bigger rival Philip Morris International.

Management shakeup

BAT last month named Soraya Benchikh as its next chief financial officer in the latest management change under the company’s new boss.

The appointment followed a shakeup in June by Chief Executive Officer Tadeu Marroco, who replaced several business heads to jumpstart the company’s sluggish performance.

BAT’s pod refill Vuse vapes are facing stiff competition from disposable vapes from upstart competitors, many of whom are based in China. Marroco said recently that disposables now account for more than half of the US market, the biggest market for vapes.

Governments in France, the UK and the US are considering a crackdown on disposables and vape flavours amid concerns the products are targeting underage users. BAT has said it is planning a media campaign to curb underage vaping.

The company sells flavoured refillable e-cigarettes as well as disposables in other markets outside the US including Europe. — Bloomberg