British American Tobacco writes down £25bn as it moves away from cigarettes
6 December 2023, 20:04
British American Tobacco said it is in the process of transforming its business from traditional, combustible products to ‘smoke-free’ ones.
Shares in British American Tobacco tumbled on Wednesday after the owner of Camel and American Spirit cigarettes took an impairment charge of about 31.5 billion dollars (£25 billion), mainly related to its struggling US cigarette brands, with the number of people who smoke in steep decline.
In a financial update, London-based British American Tobacco said it is in the process of transforming its business from traditional, combustible products to “smoke-free” ones.
Its goal is to get half its revenue from non-combustibles by 2035. Combustibles currently account for about 83% of its sales, according to the data firm FactSet.
In 2017, British American Tobacco bought Reynolds American for about 49 billion dollars (£39 billion) in cash and stock.
Earlier this year, the Centres for Disease Control and Prevention released a survey that showed US cigarette smoking at another all-time low, with one in nine adults saying they were current smokers. In the mid-1960s, 42% of US adults were smokers.
The preliminary survey findings sometimes are revised after further analysis.
The rate has been gradually dropping for decades, due to cigarette taxes, tobacco product price hikes, smoking bans and changes in the social acceptability of lighting up in public.
Cigarette smoking is a risk factor for lung cancer, heart disease and stroke, and it has long been considered the leading cause of preventable death.
At the same time, the CDC survey showed that electronic cigarette use rose, to about one in 17 adults.
Those are the customers British American Tobacco is turning its focus to. The company plans to invest in its “new products” business, which includes vaporisers.
British American Tobacco shares fell 2.72 dollars (£2.16), about 8.6%, to 28.82 dollars (£22.94) in afternoon trading on Wednesday.
Other tobacco companies also fell, with Altria down 2.75% and Philip Morris losing 1.5%.
