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Rise In Demand For Tobacco Alternatives Prompts BAT To Maintain Its Forecast

Rise In Demand For Tobacco Alternatives Prompts BAT To Maintain Its Forecast
British American Tobacco said that 2021 will be a "pivotal year," as it reaffirmed its full-year profit and sales expectations, supported by strong demand for its "new categories" products.
Its shares, which have fallen 3 per cent this year, climbed 1.75 per cent to 2,671 pence in morning trade after the FTSE-listed business hinted at a potential share repurchase.
In the fiscal year ending September 30, the business claimed an extra 3.6 million consumers utilised its "new categories" goods - e-cigarettes, tobacco heating, and oral nicotine - bringing its total non-combustible user base to 17.1 million.
"2021 is the pivotal year in our transformation journey," CEO Jack Bowles said in a statement, highlighting that after years of losses, products from its new categories business would contribute to overall profits for the first time this year.
In the first half of the year, the Lucky Strike cigarettes manufacturer invested more than 346 million pounds ($459.56 million) in new categories, which helped grow sales by more than 50 per cent.
"We continued to accelerate these investments in the second half which has helped it make a sizeable contribution to revenue growth (this year)," Chief Marketing Officer Kingsley Wheaton said.
BAT's Vuse e-cigarettes gained 6.9 percentage points in market share in 2021 as a result of improved marketing and distribution.
In the year to September 30, its glo tobacco heating products gained an additional 4.5 percentage points in market share in their top markets.
"After a number of years of disappointment, strong current year momentum continued to build (in the new categories business)," Jefferies analyst Owen Bennett said, adding that all in all it was a "net positive print".
BAT maintained its full-year prediction for constant currency revenue growth of more than 5 per cent and adjusted profits per share growth in the mid-single digits in 2021, citing the benefits of selling higher-priced cigarettes.
It upgraded its forecast for global tobacco sector volumes to "broadly flat" from 1.5 per cent lower. Volumes are expected to dip by roughly 5.5 per cent in the United States.
The business also stated that given its present price, it recognises the "obvious value" of a repurchase, which Bennett predicted would result in an announcement before the end of the year.

Christopher J. Mitchell

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