British American Tobacco (BAT) is expecting its operating cash flow conversion for the 2024 full year to be above 90% and gross capital expenditure to top £600 million (R13.6 billion) despite a projected 2% lowering in global tobacco volumes.
BAT had this year intensified “targeted investments in the US combustible business, with early signs” of improvement.
This was set to translate to a “low-single figure organic constant currency revenue growth” for the year to December 2024 while adjusted profits from operations is are also likely to grow by around similar margins.
BAT yesterday said it was expecting to take a knock from translational foreign currency headwinds to a margin of about 4.5% on its full-year adjusted profit from operations. Shares in the company traded 1.16% firmer in afternoon trade on the JSE yesterday.
Net finance costs for the period are expected to amount to £1.6bn, subject to foreign exchange and interest rate volatility.
The company’s expected financial performance for 2024 comes against the backdrop of “improving performance” under its new category of smokeless products as tobacco harm reduction efforts get underway.
Under its new categories, illicit single-use vape headwinds persisted in the US market. BAT’s financial performance in the US moreover continues to be impacted by the illicit vapour market although the company is counting on its investments into new category products.
“We are on track to deliver our 2024 guidance, demonstrating the strength and resilience of our business,” said Tadeu Marroco, CEO for BAT.
“Our second-half performance acceleration is driven by the phasing of New Categories innovation, the benefits of investment in U.S. commercial actions and the unwind of wholesaler inventory movements.”
The company was now “actively supporting more appropriate regulation and enforcement to tackle illicit products”.
Encouragingly for BAT, there are encouraging signs of vapour enforcement works driving strong legal vapour industry gains with Vuse capturing the majority of the flowback in Louisiana.
In its Americas and Europe markets, BAT was witnessing continued new categories poly-usage benefiting the vapour category.
Its value share leadership in the region had been maintained at 31.6%, with strong performances in Spain, France and Germany, more than offset by the impact of illicit growth in Canada post the Quebec flavour ban.
In Mexico, BAT was continuing to monitor the progress of legislation seeking to ban vapour products
BAT was thus expecting to “deliver improved new category and combustibles revenue growth” in the second half year to December compared to the first half of the year.
BAT will pay the last instalment of its interim dividend at the beginning of February next year while it has intensified a share purchase program, it said this week.
On February 3 next year, BAT will pay out the fourth and final instalment of 58.88 pence for its interim dividend. BAT has already paid three instalments of similar amounts after it declared a 235.52 pence interim dividend in February this year.
The company also announced yesterday that it bought back 69 132 ordinary shares from Merrill Lynch International as part of its buy back program.
This was in accordance with the authority granted by shareholders at the company's annual general meeting in April this year. The authority enabled the company to purchase its own ordinary shares.
BUSINESS REPORT