British American Tobacco forecast on Wednesday e-cigarette and tobacco heating devices would contribute to earnings for the first time this year as more smokers switch to products perceived as less harmful in the pandemic.

The maker of Lucky Strike and Newport cigarettes saw three million more customers use its “new categories” products – including e-cigarette, tobacco heating and oral nicotine – during the COVID-19 pandemic in 2020.

It also sold more higher priced cigarettes, helping adjusted earnings to reach 331.7 pence per share (EPS), beating analysts’ average estimate of 329.87 pence, according to Refinitiv data.

However, pretax profits fell short of expectations, knocking shares in the world’s second-largest tobacco company down around 5% in early trading.

“For the first year, new category losses will reduce and therefore new categories are going to contribute to our full year (2021) earnings growth,” Chief Marketing Officer Kingsley Wheaton told Reuters.

The World Health Organization and the United States Centers for Disease Control and Prevention have redoubled warnings about smoking, saying it makes it harder to fight off the effects of respiratory disease COVID-19.

BAT expects global tobacco industry volumes to decline around 3% in 2021. It did not, however, give a forecast for the key U.S. market, citing COVID-19 uncertainties.

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Siddharth Cavale – Reuters – February 17, 2021.

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