British American Tobacco first-half revenues, profits to slip

FILE PHOTO: Signage is seen at the London offices of British American Tobacco, in London, Britain, January 15, 2021. REUTERS/Toby Melville/File Photo

LONDON (Reuters) -British American Tobacco said on Tuesday that declining sales of cigarettes and the rise of illegal vapes in the U.S. will likely dent its half-year earnings, adding that it is sticking to its forecast for low single digit annual growth.

The maker of Dunhill and Lucky Strike cigarettes has been forced to lower its hopes for revenue and profit growth as it grapples with a tough environment in the U.S., one of its key markets.

There, both the company's traditional tobacco business and its portfolio of newer products such as vapes are struggling as users switch out its more expensive brands for illegal disposable vapes or cheaper cigarettes.

The company said while the U.S. was showing some early signs of recovery, traditional cigarette volumes were down around 9% so far this year across the industry.

Chief Executive Tadeu Marroco said that investments which the company was making in its U.S. unit and elsewhere would set BAT up for a stronger future.

"We expect growing momentum in the second half, enabled by the investments we are making today," he said.

BAT had already warned its performance would be weighted to the second half of the year and that the U.S. market and investments would drag on its results in the near-term.

Chris Beckett, head of equity research at Quilter Cheviot, said however BAT's anticipated decline in first-half revenue and profit was "more pronounced" than expected.

The company expects half-year revenue and adjusted profit from operations to fall by low single digits, but it was on track to deliver on its guidance for the full year.

It aims to build back to revenue growth of 3-5% by 2026.

BAT's shares fell around 1.7% in morning trade, but recovered to stand just under 1.5% lower by 0827 GMT.

(Reporting by Emma Rumney; editing by Kirsten Donovan Jason Neely and Louise Heavens)