British American Tobacco PLC (LSE:BATS) has nudged its full-year outlook higher as product innovation helps growth return in the US despite a continued impact from rival 'illicit' vaping products.
The FTSE 100 nicotine delivery company said it expects growth of 1% to 2% for 2025, slightly ahead of its prior guidance, enabling growth of adjusted profit from operations of 1.5% to 2.5%.
Growth in the US is set to return for both revenue and profit in the first half and full year, supported by improvements in its Combustibles business (ie cigarettes) and the launch of its Velo Plus nicotine pouches.
Revenue from its New Category products is expected to grow at a low-single-digit rate in the first half, accelerating in the second half as new products are rolled out in key markets.
Chief executive Tadeu Marroco said: “2025 is a deployment year and, as previously highlighted, we expect our performance to be H2 weighted, mainly driven by the roll-out of New Category innovations in key markets from the middle of the year.”
He hailed the expected return to US revenue and profit growth in the first half and full year, adding that while the combustible tobacco industry volumes remain "under pressure", down around 9% in the year so far.
And he added that BAT has "stabilised our total industry volume and value share" and is gaining share, driven by Natural American Spirit and Lucky Strike cigarettes.
The Velo pouches brand grew sales at triple-digit percentage rates, though Glo heat-not-burn saw its market share decline in some markets, though the company expects second-half gains from the phased expansion of a new Glo Hilo range.
Vaping brand Vuse remains impacted by 'illicit vapour' products in the US and Canada, however, with the company anticipating an improvement in H2 revenue with the roll-out of Vuse Ultra.
BAT expects to deliver operating cash flow conversion of over 90% in 2025, having increased its share buy-back to £1.1 billion earlier in the year, while reducing leverage over the next two years.