On June 9, 2020, British American Tobacco (BAT) provided a report on how the company performed during the first half of 2020. With growth across several different product categories, the company says it remains committed to its 65 percent dividend payout policy.
BAT reports that it continues to see good pricing, strong volume and value share within its combustibles business as well as three new categories–vapor, tobacco heating and modern oral. Also, developed markets are reportedly strong with continued good pricing with little evidence of accelerated downgrading and a strong performance overall of BAT within the U.S. market despite the COVID-19 pandemic. In terms of the pandemic abroad, BAT reports that the impact of COVID-19 has been more pronounced in markets like Bangladesh, Vietnam and Malaysia. Closures and other lock-down measures in countries like South Africa, Mexico and Argentina have gone on longer than anticipated and continue to cause issues. South Africa has also seen its tobacco sales within the country being banned due to the pandemic, a move that has no signs of lifting any time soon.
Based on these results and information, BAT is now anticipating a full year headwind of c.3 percent from COVID-19 on constant currency adjusted revenue. For the 2020 fiscal year, BAT anticipates a constant currency adjusted revenue growth in the 1-3 percent range. The company plans to invest more in new categories and has a goal of £5bn revenue by 2025, though growth in 2020 is expected to be slower than anticipated.
Here’s a statement released by Jack Bowles, chief executive at BAT:
“Our primary focus remains the health and well being of our employees and we are working hard to best ensure their safety and minimise the risk of virus transmission. As a global business we are also leveraging our distribution and manufacturing capabilities to support the wider community at this difficult time.
“Our purpose is clear, we are committed to Building a Better Tomorrow. This includes our potential vaccine for COVID-19, under development at our US bio-tech subsidiary, Kentucky BioProcessing (KBP), which has demonstrated its ability to generate an immune response in pre-clinical testing and is poised to move to clinical trials.
“We have made a good start to the year, with strong volume and value share growth in combustibles underpinning the sustainability of the business.
“Our focus on becoming a faster, simpler, more agile business through Project Quantum has positioned us well for continued delivery in the current environment and these efforts have ensured we are a highly resilient company.
We are delivering on our three key priorities:
- We are driving value growth in combustibles
- We are continuing to invest behind growth and the New Categories
- We are transforming the business with the completion of phase 1 of Project Quantum.
“Thanks to the hard work and dedication of our teams around the world, I am pleased to say that we continue to perform well and expect a good performance in 2020, in the context of very challenging circumstances.
“Looking further ahead, we are confident about the future opportunities for BAT. Our continued commitment to our dividend policy reflects this confidence.”