Tobacco group takes £6.2bn charge over class action suit but reports profit of £2.74bn
13 February 2025 - 10:53
UPDATED 13 February 2025 - 14:53
by Kabelo Khumalo and Jacqueline Mackenzie
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The British American Tobacco SA office in Cape Town. Picture: ZIYAAD DOUGLAS/GALLO IMAGES
Shares in British American Tobacco (BAT) plummeted on Thursday after the group booked a £6.2bn charge from outstanding litigation in Canada.
The stock was down as much as 9% on the JSE but pared the loss to 6.6% in the afternoon. The shares were last trading at R727 apiece.
BAT subsidiary Imperial Tobacco Canada (ITCAN) and other companies have over the past decade faced class action lawsuits, alleging the tobacco companies misled consumers about the health risks of smoking and failed to adequately warn them of the dangers.
BAT CFO Soraya Benchikh, who presented her first full-year results in that role, said the Canadian litigation was one of the challenges facing the group.
“In 2025, we will face challenges including FII GLO [litigation which concerns the compatibility of the UK’s corporation tax regime with EU law] repayments and potential settlement payments in connection with ITCAN’s outstanding litigation in Canada,” she said.
“Excluding those items, we expect BAT to generate over £8bn of average annual free cash flow, growing at least in line with adjusted profit from operations,” Benchickh said.
CEO Tadeu Marroco also warned that tax increases in Bangladesh and Australia will hurt its bottom line.
“In 2025, while we expect significant regulatory and fiscal headwinds in Bangladesh and Australia to impact our combustibles performance, I am confident that we will progressively build on our delivery as we shift from investment to deployment, and we remain committed to returning to our midterm guidance of 3%-5% revenue and 4%-6% adjusted profit from operations growth on a constant currency in 2026,” he said.
The group reported a £2.74bn profit from operations as it added 3.6-million adult consumers to its smokeless products, which now account for 17.5% of group revenue, an increase of one percentage point from the year before.
Revenue for the 12 months to end-December was down 5.2% at £25.7bn, driven by the sale of BAT’s businesses in Russia and Belarus in September 2023 and translational forex headwinds, it said. Reported profit from operations of £2.74bn compared with a loss of £15.75bn in 2023, when the group was hit by one-off impairment charges, mainly in the US.
Reuters reported in October 2024 that BAT, along with Philip Morris and Japan Tobacco, was set to pay C$32.5bn to settle a long-running tobacco lawsuit in Canada, as part of a proposed plan by a court-appointed mediator.
New categories’ contribution increased by £251m on an adjusted organic, constant currency basis.
Marroco said the group’s targeted investments in the US had strengthened the business, despite a challenging macroeconomic backdrop and a growing presence of illicit single-use vapour products.
“Through our commercial actions, we started to improve our performance with sharper execution and we are opening up untapped growth opportunities, particularly related to Modern Oral,” he said. .
The group’s dividend was up 2% at 240.24p a share. It said it was planning a £900m share buyback in 2025.
BAT, whose brands include Lucky Strike, Rothmans, Dunhill and Kent, is committed to becoming a predominantly smokeless business by 2035 and has been expanding its smokeless new category product portfolio. A total of 29.1-million consumers now use its smokeless brands.
“I am confident that we have the right strategy, science, innovation, breadth of capabilities and people to achieve this ambition and deliver long-term sustainable value for all our stakeholders,” said Marroco.
While the global tobacco industry volume is expected to be down about 2%, BAT expects about 1% revenue growth at constant rates in 2025. Adjusted profit from operations is forecast to grow by 1.5%-2.5% and to be weighted to the second half as it deploys innovations throughout the year.
Johann Rupert’s Reinet in January sold of all its stake in the London-based cigarette maker for £1.2bn.
Update: February 13 2024 This story contains additional information throughout
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BAT stocks plummet on Canadian litigation charge
Tobacco group takes £6.2bn charge over class action suit but reports profit of £2.74bn
Shares in British American Tobacco (BAT) plummeted on Thursday after the group booked a £6.2bn charge from outstanding litigation in Canada.
The stock was down as much as 9% on the JSE but pared the loss to 6.6% in the afternoon. The shares were last trading at R727 apiece.
BAT subsidiary Imperial Tobacco Canada (ITCAN) and other companies have over the past decade faced class action lawsuits, alleging the tobacco companies misled consumers about the health risks of smoking and failed to adequately warn them of the dangers.
BAT CFO Soraya Benchikh, who presented her first full-year results in that role, said the Canadian litigation was one of the challenges facing the group.
“In 2025, we will face challenges including FII GLO [litigation which concerns the compatibility of the UK’s corporation tax regime with EU law] repayments and potential settlement payments in connection with ITCAN’s outstanding litigation in Canada,” she said.
“Excluding those items, we expect BAT to generate over £8bn of average annual free cash flow, growing at least in line with adjusted profit from operations,” Benchickh said.
CEO Tadeu Marroco also warned that tax increases in Bangladesh and Australia will hurt its bottom line.
“In 2025, while we expect significant regulatory and fiscal headwinds in Bangladesh and Australia to impact our combustibles performance, I am confident that we will progressively build on our delivery as we shift from investment to deployment, and we remain committed to returning to our midterm guidance of 3%-5% revenue and 4%-6% adjusted profit from operations growth on a constant currency in 2026,” he said.
The group reported a £2.74bn profit from operations as it added 3.6-million adult consumers to its smokeless products, which now account for 17.5% of group revenue, an increase of one percentage point from the year before.
Revenue for the 12 months to end-December was down 5.2% at £25.7bn, driven by the sale of BAT’s businesses in Russia and Belarus in September 2023 and translational forex headwinds, it said. Reported profit from operations of £2.74bn compared with a loss of £15.75bn in 2023, when the group was hit by one-off impairment charges, mainly in the US.
Reuters reported in October 2024 that BAT, along with Philip Morris and Japan Tobacco, was set to pay C$32.5bn to settle a long-running tobacco lawsuit in Canada, as part of a proposed plan by a court-appointed mediator.
New categories’ contribution increased by £251m on an adjusted organic, constant currency basis.
Marroco said the group’s targeted investments in the US had strengthened the business, despite a challenging macroeconomic backdrop and a growing presence of illicit single-use vapour products.
“Through our commercial actions, we started to improve our performance with sharper execution and we are opening up untapped growth opportunities, particularly related to Modern Oral,” he said.
.
The group’s dividend was up 2% at 240.24p a share. It said it was planning a £900m share buyback in 2025.
BAT, whose brands include Lucky Strike, Rothmans, Dunhill and Kent, is committed to becoming a predominantly smokeless business by 2035 and has been expanding its smokeless new category product portfolio. A total of 29.1-million consumers now use its smokeless brands.
“I am confident that we have the right strategy, science, innovation, breadth of capabilities and people to achieve this ambition and deliver long-term sustainable value for all our stakeholders,” said Marroco.
While the global tobacco industry volume is expected to be down about 2%, BAT expects about 1% revenue growth at constant rates in 2025. Adjusted profit from operations is forecast to grow by 1.5%-2.5% and to be weighted to the second half as it deploys innovations throughout the year.
Johann Rupert’s Reinet in January sold of all its stake in the London-based cigarette maker for £1.2bn.
Update: February 13 2024
This story contains additional information throughout
MackenzieJ@arena.africa
khumalok@busnesslive.co.za
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