British American Tobacco said that it is to take an around £25 billion (€29.2 billion) impairment charge as it reassesses the value of some of its U.S. cigarette brands.
The maker of Lucky Strike and Dunhill cigarettes said challenges in the United States, where a difficult economy and popularity of often illicit disposable vapes have weighed on its business, would drag on its growth in both 2023 and 2024.
Impairment Charge
It said economic challenges affecting the U.S. business, which have seen some inflation-weary consumers downgrade to cheaper brands, had contributed to the £25 billion non-cash adjusting impairment charge.
'This accounting adjustment mainly relates to some of our acquired U.S. combustibles brands, as we now assess their carrying value and useful economic lives over an estimated period of 30 years,' BAT said in its pre-close trading update.
The tobacco firm added that it would start amortising the remaining value of its U.S. combustibles brands in 2024.
Revenue Forecast
BAT maintained its 2023 full-year revenue forecast at 3% to 5% organic growth in constant currency terms, but added this would likely be at the lower end of the range because of pressures in the U.S. and planned investment into its newer products, including vapes and oral nicotine.
It said that these factors also meant it would expect low single digit growth in revenue and adjusted profit from operations in 2024.
'Reward Shareholders'
“We will continue to reward shareholders through our strong cash returns, including our progressive dividend, and, once the middle of our leverage range is reached, we will evaluate all opportunities to return excess cash to our shareholders," commented Tadeu Marroco, chief executive.
“I am confident that the choices we are making today will drive our long-term success and deliver sustainable value for all of our stakeholders.”
Additional reporting by ESM
