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British American Tobacco PLC on Wednesday reported a sharp drop in profit as a result of rising costs, with a boost from New Categories revenue proving too small to light up its interim performance.
For six months to June 30, the London-based cigarettes, tobacco and other nicotine products maker said pretax profit fell 30% to £3.06 billion from £4.38 billion at the same time last year as expenses swelled. Operating costs by jumped 49% to £5.09 billion from £3.41 billion over the reporting period.
Interim revenue was 3.7% higher at £12.87 billion from £12.18 billion, led by growth in New Categories.
Cigarettes and tobacco heating products volumes dropped 3.1% to 314 million, dragged down mainly by the decline in US tobacco industry.
New categories revenue surged by 45% to £1.30 billion. Non-combustible products, such as VUSE, VELO and GLO, represented 15% of total revenue. New categories includes tobacco heating products and vapour.
By contrast, revenue from combustibles edged 2.3% higher to £10.77 billion from £10.52 billion.
In February, BAT announced it had declared an interim dividend of 217.8 pence, payable in four equal quarterly instalments of 54.45p in May, August, November and February 2023.
‘I am very proud that our continued New Categories growth momentum is driving Faster Transformation, with revenue growth of 45% in the first half of 2022, on top of 51% growth in FY2021. We are delivering both strong operational performance and transforming the business,’ said Chief Executive Jack Bowle.
‘I am especially proud that the number of consumers using our non-combustible brands has passed the milestone of 20 million in the first half,’ Bowles said.
BAT announced that Veronique Laury will join its board as an independent non-executive director from September 19. Laury was chief executive at Home improvement products retailer Kingfisher PLC between 2014 and 2019.
It also said Sue Farr will succeed Dimitri Panayotopoulos as senior independent director with effect from August 1. Farr has been a non-executive director since February 2015.
On the full-year guidance, the group said it expects global tobacco industry volume to be down 3.0% partly due to the US and Turkey, and uncertainty over Russia's war in Ukraine.
BAT predicts constant currency revenue growth of 2% to 4% and continued progress towards £5 billion in New Category revenue in 2025.
British American Tobacco shares remained flat at 3,471.00p each in London on Wednesday morning. In Johannesburg, its stock was down 0.5% at R 704.90.
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