BAT slumps to loss on £27.3bn US hit

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Lucky Strike and Dunhill firm British American Tobacco has revealed it swung to an annual loss after taking a higher-than-expected charge on its US business.

The cigarette and vape group slumped to a pre-tax loss of £17.1 billion in 2023 against profits of £9.3 billion the previous year following a £27.3 billion writedown on its US brands – higher than the £25 billion hit it warned over in December.

It said the charge was due to its long-term strategy to shift away from traditional cigarettes, as well as lower sales amid wider economic uncertainty and “the growth of illicit single-use vapour products and uncertainty around a potential menthol ban in the US”.

The group said the higher charge was partly as a result of currency movements since its initial estimation.

BAT said sales by volume in the global tobacco industry are expected to fall by around 3% this year, but it backed previous guidance for “low single digit” organic revenue and underlying earnings growth for the year.

The firm’s chief executive Tadeu Marroco said the group was not expecting to take a financial impact on its UK business from the impending ban on disposable vapes and the Government’s plan for a generation ban on cigarettes.

He said the writedown was “unique” to the US and largely following its move in 2017 to buy the 57.8% of Reynolds American it did not already own for a total of 49 billion US dollars (£39 billion).

Mr Marroco also said that the incoming disposable ban in the UK, which is aimed at tackling the rise in young people vaping and protecting children’s health, would not have a big impact on the group.

Through sales of its Vuse Go brand, disposable vape products account for between 42% and 50% of its UK vaping business, which in turn accounts for around half of all UK sales.

But he said the group is the leader in Britain’s refillable vape market, which will see demand boosted following the disposable ban.

“Because we have a modest share (in disposable vapes), we would be in a stronger position, because we are leaders in refillable,” said Mr Marroco.

Its full-year figures showed it reached profitability in its so-called new categories arm – which is led by Vuse and Vue – two years ahead of target.

Shares in the firm lifted 5% in morning trading on Thursday.