BAT says SA cigarette sales are recovering


BAT says SA cigarette sales are recovering

Published Date: 2021-02-18 | Source: Stephen Gunnion | Author: Stephen Gunnion

BAT says SA cigarette sales are recovering

The global tobacco giant compensated for a dip in volumes with higher prices and a stronger sales mix.

British American Tobacco says sales revenue in South Africa rapidly recovered after last year's tobacco ban. Still, combined with other Covid-19 restrictions including fewer customers making duty-free purchases at airports, the group has reported a decline in cigarette sales for 2020.

The global tobacco group still claimed market share gains in cigarettes and tobacco heating products. It made up for a 4.5% decline in cigarette sales by raising prices and focusing on more expensive brands. In South Africa, a total sales ban of tobacco products came into effect last March and lasted until August.

The company owns brands that include Dunhill, Kent, Rothmans, Pall Mall and Lucky Strike. While it sees continued strong value growth in combustible tobacco products like cigarettes, it has grown its market share for 'new categories' which include nicotine replacements such as Vuse, the fastest growing vaping brand, with increased investment in the second half of the year. In November, US subsidiary Reynolds American acquired the nicotine pouch assets of Dryft Sciences, a US-based Modern Oral nicotine product company.

Revenue for the year to end-December dipped marginally to £25.8 billion and profit from operations rose 10.5% to £9.96 billion as its operating margin improved. Adjusted for constant exchange rates, profit from operations was 4.8% higher at £11.4 billion. Also on an adjusted basis, diluted earnings per share increased by 5.5% to 331.7p. It said it had delivered £660 million of cost savings and was well on the way to deliver the £1 billion of savings targeted by its Project Quantum by next year. It increased its dividend by 2.5% to 215.6p per share.

After growing users of its non-combustible products by 3 million to 13.5 million, BAT said it was on track to have 50 million consumers of its non-combustible products by 2030.

BAT said global tobacco industry volumes were expected to decline by around 3% in the year ahead. It forecast constant currency revenue growth of 3% to 5% for the year and mid-single digit growth in earnings per share in constant currency, reflecting the continued impact of Covid-19. Post Covid-19, it expected this to rise to the high single figures.

The company's shares fell 4.5% to R534.21 yesterday.

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