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(Correcting the dividend declared.)
British American Tobacco PLC on Thursday reported a marginal rise in profit for 2022 as the cigarette maker navigated an ‘increasingly challenging’ economic environment, but it noted that momentum in New Category was ‘strong’.
The London-based maker of Dunhill, Kent and Lucky Strike cigarettes said pretax profit was up just 1.7% to £9.32 billion in 2022 from £9.16 billion in 2021.
BAT shares slid 5.5% to 2,921.50p each in London on Thursday morning. In Johannesburg, its stock was down 4.7% at R 630.09.
In 2022, revenue grew 7.7% to £27.65 billion from £25.68 billion, despite lower volumes. Cigarettes and tobacco heating products volumes fell by 4.2% to 629 million.
The producer of vuse vaping and glo tobacco heating products said New Category consumables volume continued to grow and was up in all three categories.
New Categories were now a ‘meaningful’ contributor to group’s financial results, it said, expecting this emerging business to be profitable in 2024, one year ahead of target.
In 2022, the group invested more than £2 billion in New Categories, while making excellent progress in reducing operating losses by 62%.
BAT said it was confident of reaching £5 billion revenue target for New Categories by 2025.
While emerging markets began to recover from the impact of Covid-19 last year, including Cuba, Bangladesh, Brazil, and its global travel retail business, these effects were more than offset by volume decline in the US, Turkey and the sale of its Iranian business partway through 2021.
For 2022, BAT improved its total dividend by 6.0% to 230.90 pence from 217.80p a year earlier.
Annual earnings per share was lower at 293.3p, down 1.2% from 296.9p.
‘Looking forward, while we expect the macro-economic environment to remain challenging, we will continue to deliver and further accelerate our transformation,’ BAT Chief Executive Jack Bowles said.
Noting inflation, BAT said: ‘Further simplification, productivity improvements and savings will be a key focus as we continue to sharpen our core capabilities. These are critical to addressing inflationary pressures while continuing to fund New Category investment and improve New Category profitability as we accelerate our transformation towards A Better Tomorrow.’ A Better Tomorrow is the company’s corporate strategy to reduce its health impact, first announced in March 2020.
In its 2023 outlook, BAT predicted 3% to 5% organic constant currency revenue growth, depending on the timing of the transfer of the Russian and Belarusian businesses expected to close in 2023.
It projects mid-single figure constant currency adjusted EPS growth.
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