British American Tobacco PLC (LSE:BATS) reported a 25% slump in profits in the first half, as the group took a £957mln hit from exiting Russia after the invasion of Ukraine.
However, the maker of Camel and Lucky Strike cigarettes is still confident it can meet full-year guidance, despite the increasing "macro-economic pressures".
For the six months to June 30, profit from operations on a reported basis slumped 25% to £3.67bn with reported operating margin 11.7 ppts lower at 28.6%.
Revenue was up 5.7% to £12.86bn, with diluted EPS down 42.9% to 80.8p. New categories revenue was up 45% to £1.28bn.
"I am very proud that our continued new categories growth momentum is driving faster transformation, with revenue growth of 45% in the first half of 2022, on top of 51% growth in fiscal 2021," said Jack Bowles, chief executive.
"Revenue growth was ahead of volume growth in all three new categories. We are confident in delivering £5bn new category revenue, and profitability by 2025."
The company said results were also impacted by a charge of £450mln related to an investigation into "alleged historical breach of sanctions" and other charges related to Quantum, including the exit from Egypt and planned factory closure in Singapore.
Though the global tobacco industry volume is expected to be down by around 3% mainly due to the US, Turkey, and uncertainty over Russia and Ukraine, the company said it is making progress towards £5bn in new category revenue in 2025.
According to the chief, "adjusted net debt/adjusted EBITDA (is) expected within our 2-3x corridor", and the firm is committed to "dividend growth in sterling terms and our long-term 65% dividend pay-out ratio."
"We expect to generate £40bn of free cash flow before dividends over the next five years," the company said in a statement.
As of June, the company was expecting revenue growth of 2% to 4% at constant currency, mid-single figure adjusted diluted EPS growth at constant currency, and operating cash conversion in excess of 90% of adjusted profits for fiscal 2022.