British American Tobacco Plc’s growth in smoke-free products was dragged down by the prevalence of illicit vapes in the US market, pushing the cigarette maker to provide disappointing guidance for 2025.
The maker of Dunhill and Lucky Strike cigarettes said that sales of vapes in the US fell 0.8% last year, with price increases failing to make up for a slump in volumes, in a sign that competition from unauthorized manufacturers is eroding its market share.
Cigarette volumes in the US plunged 10.1%, BAT said, blaming a downturn in consumer spending and an increase in the discount category, where the company doesn’t operate. BAT shares tumbled as much as 9% in London, the biggest intraday decline in more than a year, but remain up 7% since the start of the year.
Guidance for revenue growth of about 1% for 2025, partly because of increased excise and VAT in Bangladesh and new tobacco regulations in Australia, disappointed analysts. BAT also forecast growth in adjusted operating profit of 1.5% to 2.5%.
“It will be another year without much to show in profit terms,” wrote Rae Maile, an analyst at Panmure Liberum, in a note.
“We all understand the situation is unsustainable in the US on the vapor side,” said Chief Executive Officer Tadeu Marroco on a call with reporters, adding that the illicit vapes mean that users have no control over the specifics of what they are consuming. “Hopefully the new administration will bring a new way to think about enforcement.”
BAT, which said performance this year would be stronger in the second half, also launched a £900 million ($1.1 billion) share buyback.
