British American Tobacco (BAT), the owner of Pall Mall and Lucky Strike, has reported strong results from its shift to smokeless products as it awaits further updates on its legal action in Canada.
The company confirmed in a trading update that it would deliver full-year results in line with guidance, as trading in the second half had grown in line with expectations, as reported by .
BAT is currently awaiting the conclusion of negotiations over a five-year legal process involving its subsidiary Imperial Tobacco Canada Limited obtaining creditor protection under the Canadian Companies’ Creditors Arrangement Act. The cigarette manufacturer's full-year results for 2024 are due in February, where it said there would be "more clarity" on the ongoing Canadian litigation.
Shares in BAT hit a two-high at the end of November as investors started to buy into the group’s shift away from traditional tobacco products such as cigarettes. "[The results] have seen the firm use cost cuts and price increases so it can offset falling stick volumes and still generate fat profits and copious cash flow," said Dannis Hewson, AJ Bell’s head of financial analysis.
The company has been increasingly pivoting towards vapes and the oral market in recent years in an attempt to pull away from the slowly dwindling number of smokers.
British American Tobacco's chief executive, Tadeu Marroco, stated: "We continue to make progress towards our ambition of becoming a predominantly smokeless business by 2035."
He added: "We are making further progress increasing profitability across new categories, and I am particularly pleased with the improvements in heated products and modern oral."
However, the company also reported a nine per cent drop in US industry volumes since the start of 2024, attributing this to "continued macro-economic pressures and the impact of illicit single-use vapour products". Hewson further commented: "In the past five years, cash flow has comfortably covered the dividend and actually done so by an ever-wider margin, despite the ongoing decline in stick volumes."
