Lucky Strike firm BAT reveals £957m hit from leaving Russia

Lucky Strike cigarette maker British American Tobacco (BAT) has revealed a 25% fall in half-year earnings after taking a near-£1 billion hit from its move to pull out of Russia.

The group reported a £957 million impairment charge related to the transfer of its Russian business.

It saw profit from operations drop by a quarter to £3.7 billion in the six months to June 30, largely as a result of the charge.

BAT, which also makes Dunhill and Vuse vape pods, said it expects worldwide sales of tobacco by volume to fall by around 3% over the year due in part to the Ukraine war.

Chief executive Jack Bowles said: “We are not immune, of course, to the increasing macroeconomic pressures, exacerbated by the conflict in Ukraine.

“However, we are well positioned to navigate the current turbulent environment due to our powerful brands, operational agility and continued strong cash generation.”

BAT said in June that it was in advanced discussions with its distributor in Russia to sell the business, but it has not yet sealed an agreement to transfer any of the shares in the division.

Mr Bowles told the PA news agency that the company is “going through the motions” to find a solution over the Russian operation but stressed it is a “complex issue”.

It came as the boss also told PA that customer demand has remained “robust” despite rising pressure on household incomes.

“We do have many premium brands but the limited price gaps against cheaper products mean we haven’t seen customers buying down in price,” he said.

“There is also plenty of brand equity, so we have been really pleased with demand levels.”

Its half-year results showed that revenues rose 5.7% to £12.9 billion, pushed higher by price rises and as demand increases for its vaping and oral nicotine products.

It stuck by its full-year guidance for revenues to grow by between 2% and 4%.

But analysts raised concerns over the hit from the Russia-Ukraine conflict to the likes of BAT and rivals such as Philip Morris International.

Ross Hindle, an analyst at Third Bridge, said: “Russia and Ukraine are very important heated tobacco markets. They are even more important for BAT than Philip Morris International, with 26% of their heated tobacco sales coming from the region historically.”