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01/10 15:53
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call summary indicates several negative factors: declining group revenue, macroeconomic headwinds, and a decline in combustible volume. While there are positives like new category revenue growth and a share buyback program, the Q&A section highlights concerns about elasticity in U.S. combustibles and regulatory challenges. Overall, the negative aspects, particularly in the U.S. market, outweigh the positives, leading to a negative sentiment rating.
Group Revenue GBP 12.5 billion, down 0.8% year-over-year; impacted by macroeconomic headwinds in the U.S. and wholesaler inventory movements.
New Category Revenue GBP 2.3 billion, up over 7% year-over-year; driven by strong performance from Velo in all regions.
Profit from Operations GBP 3.1 billion, down 0.9% year-over-year; affected by continued macroeconomic pressures and investment in U.S. commercial plans.
Diluted EPS GBP 1.25, up 1.3% year-over-year; benefited from lower net finance costs and tax.
Operating Margin Flat at 30.5%; improvement in new category contribution offset by inflation and transactional FX headwinds.
Cash Flow Conversion 78% in the first half; expected to exceed 90% for the full year due to continuous improvement and resource optimization.
Gross Capex GBP 600 million, above previous guidance of GBP 550 million; aimed at expanding production capacity in the Modern Oral category.
Net Finance Costs Expected to be around GBP 1.7 billion for the full year; lower than expected due to improved interest rates and cash received from ITC asset sale.
Adjusted Profit from Operations (U.S.) Down 5% year-over-year; driven by declining revenue but partially offset by efficiency gains.
Combustible Volume Declined by 6.9% on an organic basis; impacted by wholesaler inventory movements and market exits.
Modern Oral Revenue Growth Up 49% year-over-year; driven by growth across all regions and strong performance of Velo.
Vapor Revenue Growth Up nearly 3% year-over-year; strong growth in Europe and APMEA, offset by illicit products in the U.S. and Canada.
Adjusted Profit from Operations (AME Region) Up 5% year-over-year; driven by higher revenue from combustibles and new category growth.
Adjusted Profit from Operations (APMEA Region) Up 4% year-over-year; driven by strong pricing and efficiency gains.
New Category Contribution: GBP165 million increase in new category contribution, with smokeless now accounting for 18% of group revenue.
Vuse Innovations: Launched Vuse Go 2.0 and Vuse Go Reload, addressing sustainability and safety concerns.
Velo Brand Refresh: National rollout of refreshed Velo brand expression following successful pilot in New York.
Grizzly Modern Oral Launch: National rollout of Grizzly Modern Oral initiated in June.
U.S. Market Positioning: Invested in U.S. commercial plans to strengthen portfolio and drive sustainable growth.
Expansion in APMEA: Revenue growth of 48% driven by South Korea, New Zealand, and Indonesia.
Modern Oral Market Share: Velo capturing majority of Modern Oral category growth, with 65% volume share in AME.
Operational Efficiencies: Achieved flat operating margin despite high inflation and transactional FX headwinds.
Cash Flow Conversion: Cash flow conversion of 78% in the first half, on track for over 90% for the year.
Capex Guidance: Full year gross capex expected around GBP600 million, above previous guidance.
Share Buyback Initiation: Initiated sustainable share buyback of GBP700 million in 2024 and GBP900 million in 2025.
Investment Year: 2024 is an investment year focused on strengthening U.S. business and innovation.
Regulatory Issues: The company is facing challenges related to the regulation of vapor products in the U.S., including the proliferation of illicit single-use vapor products and the need for more effective regulation and enforcement.
Supply Chain Challenges: Supply chain disruptions in Sudan have impacted revenue and performance, particularly in the combustibles segment.
Competitive Pressures: The company is experiencing competitive pressures from the deep discount segment and illicit products, which have negatively affected market share and revenue in the U.S.
Macroeconomic Factors: Continued macroeconomic headwinds in the U.S. are affecting overall performance, particularly in the premium segment, which has seen a decline in volume.
Inventory Movements: Wholesaler inventory movements in the U.S. have significantly impacted first-half delivery, with expectations of unwinding in the second half.
Economic Factors: The company anticipates a 4% headwind on full year adjusted profit from operations growth due to currency translation.
New Category Contribution: GBP165 million increase in new category contribution, with a 10 percentage point increase in category contribution margin.
Investment Year: 2024 is an investment year for BAT, focusing on strengthening the U.S. business and enhancing innovation.
Share Buyback: Initiation of a sustainable share buyback, starting with GBP700 million in 2024 and GBP900 million in 2025.
Innovation Launches: Expecting an acceleration in new category performance driven by innovation launches in the second half.
Portfolio Actions: Investments in premium brands and expanding contractor distribution universe to improve competitive position.
Full Year Guidance: On track to deliver low-single digit organic revenue and adjusted profit from operations growth for the full year.
Capex Guidance: Full year gross capex expected to be around GBP600 million, above previous guidance of GBP550 million.
Long-term Growth Outlook: Expecting to progressively improve delivery to 3% to 5% organic revenue growth and mid-single digit adjusted profit from operations growth by 2026.
Net Finance Costs: Expecting full year net finance costs to be around GBP1.7 billion.
Cash Flow Conversion: Expecting cash flow conversion in excess of 90% for the year.
Dividend Policy: BAT is committed to a progressive dividend.
Share Buyback Program: In March, BAT re-initiated a share buyback program starting with GBP700 million in 2024 and GBP900 million in 2025.
The earnings call summary indicates several negative factors: declining group revenue, macroeconomic headwinds, and a decline in combustible volume. While there are positives like new category revenue growth and a share buyback program, the Q&A section highlights concerns about elasticity in U.S. combustibles and regulatory challenges. Overall, the negative aspects, particularly in the U.S. market, outweigh the positives, leading to a negative sentiment rating.
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