BAT fizzles out on ‘tumultuous tobacco’ report


BAT fizzles out on ‘tumultuous tobacco’ report

Published Date: 2019-01-08 | Source: Stephen Gunnion | Author: Stephen Gunnion

BAT fizzles out on ‘tumultuous tobacco’ report

Analysts at Cowen say British American Tobacco is arguably the most disadvantaged by the chainging US cigarette landscape.

British American Tobacco fell sharply yesterday after it was among a number of tobacco companies to be downgraded due weakening US demand for cigarettes.

Shares in the cigarette maker dropped as much as 5.7% to a new six-year low after US broker Cowen lowered its ratings for it, Altria Group and Imperial Brands to 'market perform' from 'outperform'. In a report entitled 'Tumultuous Times in Tobacco, it cited a cautious outlook for combustible cigarettes in the US for the move. Cowen said its market model suggested an 8% decline in US volumes between 2018 and 2025. Lowering its price target to £26.50 from £42.50, Cowen said BAT also faced regulatory risk due to its dominance in the menthol cigarette market in the US.

In a December update, BAT said it was engaging with US regulators after the Food and Drug Administration mooted a potential ban on traditional method cigarettes. However, it claimed to have gained market share, helped by its portfolio of Strategic Brands. It said its operations in the US were performing in line with expectations, with industry volumes likely to have declined by about 4% to 4.5% last year. Vuse volumes were up 30%, year to date, despite a recall of its Vuse Vibe electronic cigarettes due to malfunctioning batteries.

Its shares closed 4.2% lower in London at £24.7450 and 5.3% lower on the JSE at R439 yesterday. They declined by 43% last year.

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