British American Tobacco PLC (LSE:BATS) shares cratered over 8% to more than decade lows after it unveiled an ambition to become a predominantly “smokeless” business, with 50% of revenue from non-combustibles by 2035.
But the maker of Lucky Strike, Rothmans and Pall Mall cigarettes is taking a non-cash write-down of around £25 billion in 2023 relating to some of its acquired US combustibles brands.
BAT, which made the announcements as it confirmed full-year 2023 EPS guidance, said the impairment follows an assessment of the brand's carrying value and useful economic lives over an estimated period of 30 years.
It intends to amortise the remaining value of its US combustibles brands from January 2024.
Alongside this, the FTSE 100-listed firm reported continued strong volume and revenue growth in new categories, led by Vuse and Velo with new category contribution expected to be broadly breakeven, two years ahead of the original target.
But macro-economic pressures in the US have impacted combustibles performance, meaning group organic revenue are now expected at the low end of its 3-5% guidance range at constant rates.
The shares fell over 9% below 2,250p for the first time since the summer of 2010.
Analysts at Jefferies said the update was "not good", with organic sales guided to low end compared to consensus forecasts of 3.5% growth.
"Little to be positive about from this update," the analysts said, with 2023 combustible volume share worsening since the first half, US commentary that premium pressures are picking up again, vape share globally now seeing material pressure, and no improvement in heated share since half-year.
"Then into 2024, lower sale guide raises questions around any possible vape acceleration in the US (PMTA and impact?), while the increased investment suggests RRP not where it needs to be.
"It also now looks like any buyback won't be until 2025 at the earliest."
Jefferies expected the share price to fall at least 4% or more today but "still think the stock is materially undervalued".