World News

BAT says no material impact yet from COVID-19 outbreak

By Siddharth Cavale

(Reuters) – British American Tobacco <BATS.L>, the world’s No.2 tobacco maker, said on Wednesday the coronavirus outbreak has not had any material impact on it as consumers continue to make purchases even in harder hit countries.

“We don’t see any change in patterns of consumption of cigarettes because of COVID-19, ” Chief Executive Officer Jack Bowles said via webcast at the company’s capital markets day event in London.

“It is a daily purchase, so consumers continue to go to shop, even in Italy and France where tobacco shops are still open,” he added.

Tobacco and alcohol companies historically do well during times of upheaval in the market, such as the one caused by the rapid spread of coronavirus around the world.

Finance Director Tadeu Marroco said BAT faced some manufacturing disruptions in China, where the virus originated, in February that pushed launches of some of its new generation products, but production resumed in March.

The maker of Dunhill and Lucky Strike cigarettes also said that while it saw some softness in demand for cigarettes in certain geographies, the largest dent had been to duty-free shops, a negligible part of its business.

As the impacts are minimal, the company said it would not revise its previous forecasts of 4% decline in 2020 industry sales of cigarette and tobacco heating products and around 5% drop in the United States.

Since taking charge last April, Bowles has taken steps to slim down the company amid declining sales of traditional cigarettes. He shifted resources to “new category” businesses, which include its Vuse e-cigarettes and glo tobacco heating products.

On Wednesday, he said the company would extend its cost-savings program labeled ‘Quantum’ to save a further 1 billion pounds over three years that will then be reinvested in its new categories business, that includes e-cigarettes and tobacco heating products. The company has set a target to achieve 5 billion pounds in sales from this business by 2023/34.

The London-based company also maintained its forecast for constant currency adjusted revenue growth in the range of 3% to 5%, and earnings per share growth (EPS) in high single digits for the year.

Shares of the company closed down nearly a percent on Wednesday, in contrast to a 4% drop in the broader FTSE <.FTSE> that has been roiled by the relentless spread of coronavirus globally.

(Reporting by Siddharth Cavale in Bengaluru; Editing by Shinjini Ganguli)