UK
British American Tobacco PLC (BAT) is projecting a strong finish to fiscal 2019, bolstered again by Reynolds American Inc. revenue, in a second-half guidance update released recently.
However, BAT cautioned that the “recent slowdown in the US vapor market” means revenue growth from its new-category sector will be in the lower range of its 30% to 50% projections.
New categories include electronic cigarettes, heat-not-burn traditional cigarettes, snus, and other oral tobacco products. Those sales helped offset continuing declines in traditional cigarette sales volume during the first half.
BAT projected full-year adjusted revenue growth in the upper half of its 3-5% range and adjusted operating profit growth in the upper half of its 5-7% range.
It also projects high single-figure adjusted diluted earnings growth.
“We expect to deliver a strong performance in 2019, building on the good progress we made in the first half,” Jack Bowles, BAT’s c.e.o, said.
BAT updated its projections for traditional cigarette volumes, estimating a 5.5% decrease for fiscal 2019 and an additional 4% to 6% decrease in fiscal 2020. BAT and Altria previously estimated the fiscal 2019 decline could be between 4% and 5%, while Imperial Brands PLC has said it could be between 4.5% and 5%.
Wells Fargo Securities analyst Bonnie Herzog has said cigarette volumes could be down as much as 6% this year, while Stephen Pope, managing principal for Spotlight Ideas in London, said BAT’s growth is sustainable “as it is concentrated in the new products and the geographical distribution is broadly based.”