BAT hikes sales growth outlook amid shift to e-cigarettes

(Reuters) -British American Tobacco raised its annual revenue growth forecast on Tuesday as the cigarette maker’s focus on e-cigarettes and tobacco-heating devices pays off, sending its shares up 2%.

The London-listed company said it expected revenue growth of more than 5% at constant currencies, above its previous range of 3% to 5% for the year to December. It stuck to its growth expectation for adjusted earnings per share in the mid-single digit range.

The maker of Lucky Strike and Newport cigarettes said its “new category” reduced risk products had gained share in all key markets, including the United States and Japan, with the company adding 1.4 million new customers in the first quarter.

The company, which sells Vuse e-cigarettes and glo tobacco heating products, said users of its new category products now totaled 14.9 million.

“The upgrade and delivery around reduced risk products is particularly encouraging”, Jefferies analyst Owen Bennett wrote.

BAT’s comments show more customers in the United States are switching to e-cigarettes before a possible U.S. ban on menthol cigarettes and flavoured cigars.

BAT said it expected its full-year sales volumes to show a better performance than the broader industry, which is expected to see a 3% slide this year. BAT said it expected sales to be boosted by a recovery in markets such as Bangladesh, Pakistan and Vietnam.

The outlook for the U.S. industry volumes remained unclear, BAT said, blaming “macro-economic and fiscal” uncertainties.

The company also said it was seeing strong uptake of its oral nicotine products in Sweden and Norway, where it now controls more than 50% volume share in both markets.

“We continue to expect 2021 to be a pivotal year for the business, with accelerating new category revenue growth (and) a clear pathway to new category profitability,” BAT Chief Executive Jack Bowles said in a statement.

BAT has invested nearly 500 million pounds ($707 million) in its new category products business last year and has set a target of achieving 5 billion in sales for the business by 2025 and 50 million customers by 2030.

($1 = 0.7075 pounds)

(Reporting by Siddharth Cavale and Pushkala Aripaka in Bengaluru; Editing by Subhranshu Sahu, Sriraj Kalluvila and Edmund Blair)