British American Tobacco will take a £25bn impairment charge on its balance sheet next year as a result of downgrades to the value of its traditional tobacco businesses.
The firm said ‘macro-economic headwinds’ had forced it to reassess the 30-year value of its brands. Shares dropped 7.4 per cent at the opening bell on Wednesday.
The news came in a trading update this morning which also revealed the firm had hit break-even on its ‘new categories’ such as heated tobacco and vapes.
Richard Hunter, head of markets at interactive investor said, while the £25bn write-down has zero affect on trading performance, “it is nonetheless a stark reminder of the switch which needs to be made to different products as consumer tastes change and as regulation becomes a higher hurdle to jump.”
BAT has said 50 per cent of its revenue will come from non-combustible products such as vapes by 2035.
In the update to markets, chief executive Tadeu Marroco said: “To accelerate the next phase of our transformation journey, we are now committing to ‘Building a Smokeless World’.
“We will deploy our global multi-category portfolio to actively encourage smokers to ‘Switch to Better’ nicotine products, realising the multi-stakeholder benefits of ‘A Better TomorrowTM‘.
“With only 10% of the world’s 1 billion smokers currently using New Category products2, the long-term opportunity for growth as we deliver on our transformation is vast,” Marroco added.
In a strategic update, BAT said it is now focused on delivering fewer but bigger “operational priorities” and driving a more collaborative and inclusive culture as it looks to become a “more agile and modern BAT”.
BAT also said it expects to deliver full-year results in line with guidance, with three to five per cent constant currency revenue growth, despite macro-economic pressures and the rise of illicit disposable vapes piling on its US smoking business.
It comes as Prime Minister Rishi Sunak recently announced a proposal to raise the legal smoking age so that way that a 14-year-old today would be unable to legally buy cigarettes in their lifetime.
He is also considering banning disposable vapes.
