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British American Tobacco upgrades revenue forecast as non-tobacco products see record growth

BAT now anticipating its revenues will grow by 5% on a constant currency basis during 2021

British American Tobacco (LON:BATS) has upgraded its revenue forecasts for the current year on better than expected sales of its non-tobacco products.

The FTSE 100 cigarette company is now anticipating its revenues will grow by 5% on a constant currency basis during 2021, as it saw record growth in the amount of customers for its non-tobacco products.

Exchange rates will skim off some of BAT’s gains as it expects an “8% currency headwind” during H1 and the full year.

Commenting on the statement, Steve Clayton, Hargreaves and Lansdown select fund manager said:

“Currencies threaten to undo BATS’ efforts when the group reports this year, but the underlying progress is encouraging. Traditional tobacco products continue to see volumes shrinking, but BATS’ portfolio is outperforming the trend,” Clayton said.

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“Growth in the NGP division is picking up though, with the numbers of consumers choosing to use BATS’ vaping and tobacco heating products growing by over 10% in the last six months. Their Vype and glo brands are both building share in these new, reduced risk categories.”

“Tobacco firms are traditionally very strong cash generators and BATS is very much from that mould. The company is rapidly paying down the debts it took on when it acquired the rest of Reynolds American a few years ago, seeing leverage down to 3x by year end.”

BAT has set its sights on acquiring 50m consumers of non-burning products by 2025, in addition to making its own operations carbon neutral by 2030.

Regarding tobacco, BAT was aided by a strong recovery in the US, as Vuse, its vapour brand, is now close to market leadership with a share of 31%.

Jack Bowles, chief executive, said: “We added +1.4mln non-combustible product consumers in Q1, to reach a total of 14.9mln.”

“We are growing New Categories at pace, encouraging more smokers to switch to scientifically substantiated reduced-risk alternatives.”

Bowles is also confident of his company’s net-zero emissions targets.

The British American Tobacco share price is up by 1.35% early on Tuesday to 2,811.58p.

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