On June 4th, British American Tobacco (BAT) released a trading update for the first half of 2024. The company revealed that its operational performance in the first half of the year met expectations and it expects growth to accelerate in the second half. This is attributed to the launch of innovative products in new business areas, as well as benefits from investment in commercial actions in the US and inventory flow from related wholesale distributors.
The company's CEO Tadeu Marroco stated:
The company's performance to date has been in line with our expectations. We plan to achieve single-digit revenue and operating profit growth on a year-over-year basis by 2024, followed by revenue growth of 3-5% and mid-single-digit adjusted operating profit growth by 2026 (calculated on an organic and fixed exchange rate basis).
The company stated that its e-cigarette brand Vuse maintains a 41.1% global market share in the e-cigarette market, still holding a leading position. In the US market, it occupies a 51.5% market share. However, due to the illegal growth of disposable e-cigarettes, its performance will be affected. The company emphasized that Vuse will introduce a new disposable e-cigarette Vuse Go 2.0 in 2024, expecting sales and revenue to accelerate in the second half of the year.
Furthermore, since January, sales of the heated tobacco category Glo have gradually recovered their market share in key markets, mainly due to positive consumer response to the new product Glo Hyper Pro and improved consumables. Its market share has remained stable in Japan and Italy, while showing strong performance in the AME market (Asia, Middle East, Africa), Poland, and the Czech Republic. In addition, the non-tobacco consumables line VEO has been launched in 17 markets and plans to further expand during the year. The company expects the momentum of Glo's market share to continue and drive revenue improvement in the second half of the year.
Velo's overall market share in key markets has risen to 10.3%, while the market share for modern oral products remains steady at 27.0%. The AME market (Asia, Middle East, Africa) is leading, including mature markets such as Sweden, Denmark, and Norway, as well as emerging markets like the UK and Poland. The re-launched Velo brand in the US has shown promising initial results, with market share in the test market of New York increasing to 13.5%. BAT expects Velo to continue strong financial performance in the first half and full year of 2024.
As previously emphasized, we expect our performance to improve in the second half of the year, primarily due to changes in wholesalers' inventory, our ongoing business investments in the US market, and the phased launch of new products. However, due to macroeconomic pressures and a lack of effective enforcement against the illegal e-cigarette market, revenue and adjusted operating profit in the first half of the year are expected to decline by single digits. Our focus on quality growth is beginning to drive higher returns in all three new categories, especially in heated tobacco and modern oral products. Therefore, we anticipate profitability in the new categories to further improve in the first half and full year.
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