BAT's 2023 Financial Report: New Categories Drive Revenue Growth

BAT by 2FIRSTS.ai
Feb.09.2024
BAT's 2023 Financial Report: New Categories Drive Revenue Growth
BAT Releases 2023 Financial Report: Non-combustible category revenue now accounts for 16.5% of group revenue, increasing 170 basis points from 2022.

British American Tobacco (BAT) released its financial report for the year 2023 on February 8. The report highlights the robust sales of Vuse and Velo, which have driven the revenue growth in new categories including vaporization, heat-not-burn (HNB), and oral products. The income from non-combustible categories now accounts for 16.5% of the group's total revenue, representing an increase of 170 basis points compared to the fiscal year 2022.

 

Other key points are as follows:

 

The conglomerate's revenue has decreased by 1.3%, with an organic growth of 3.1% (measured at constant exchange rates), driven by a significant increase of 21.0% in organic revenue from new categories.

 

A new category, including atomized, HNB, and oral products, achieved profitability in 2023, surpassing the original goal by two years. This led to an increase in the group's profits by £398 million.

 

The conglomerate has reached a global settlement with Philip Morris International (PMI), resolving all ongoing patent infringement lawsuits between the two parties in relation to heated products (HP) and aerosol products.

 

The overall revenue for combustible products witnessed a marginal increase of 0.6%, while the organic price/composition experienced a positive growth of +6.1%. However, due to the macroeconomic pressures in the United States, there was a decline in total sales, specifically in the high-end market segment, affecting both geographic composition and sales volume.

 

AME (America and Europe Market) and APMEA (Asia Pacific Middle East Market) have demonstrated strong performance. The report shows that the new categories, including aerosol, heat-not-burn, and oral products, have achieved profits of 1.67 billion pounds and 610 million pounds respectively in these two markets.

 

The reported operating loss amounted to £15.751 billion (with a decline of 95.8 percentage points in the reported operating profit margin, reaching -57.7%), primarily influenced by a non-cash impairment charge of £27.6 billion associated with the US operations (£273 billion).

 

Adjusted organic operating profit increased by 3.9% at constant exchange rates, while the adjusted organic operating profit margin rose by 40 basis points to reach 45.6%.

 

According to the report, the diluted earnings per share amounted to -646.6 pence. However, after adjusting for organic factors, the diluted earnings per share saw a growth of 5.2% at a constant exchange rate.

 

The operating cash flow conversion rate has reached 100%, indicating that the company efficiently converts its operating cash flow into positive cash flow. However, the adjusted net debt-to-EBITDA ratio has declined to 2.6 times, reflecting a decrease in the company's financial leverage after adjusting for organic factors.

 

The dividend has grown by 2.0% to 235.52 pence, in line with the gradual increase in dividends.

 

Sustained ESG Progress - MSCI Rating Upgraded to A Grade in 2023 (2022: BBB) Two Years Ahead of Schedule, Exceeding Water Consumption and Waste Generation Targets.

 

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