British American Tobacco (BAT) is optimistic about achieving organic revenue growth in its 2024 financial year, despite grappling with challenging market conditions and increasing competition from the illicit trade sector.
CEO Tadeu Marroco yesterday emphasised the need for supportive regulatory environments to strengthen the company's operations and enhance market stability.
In a statement, BAT confirmed that it remained on track to deliver low single-digit organic revenue and adjusted profit from operations growth for the fiscal year 2024.
The company expressed its ambition to progressively improve these figures, targeting 3-5% organic revenue growth and mid-single figures in adjusted profit from operations by 2026.
“Extrapolating current spot rates, we anticipate currency translation to be a 5% headwind on FY24 adjusted profit from operations,” BAT noted, acknowledging the impact of fluctuating exchange rates on financial performance.
However, Marroco pointed to positive developments in European markets where robust regulatory frameworks have facilitated notable growth.
“Wherever we have a regulatory environment supporting a level playing field, the transformation is happening and it's happening fast,” he said.
In South Africa, where BAT operates, the firm has recently faced significant challenges linked to the rise in illicit trade.
The Tobacco Products and Electronic Delivery Systems Control Bill has also been seen as problematic for tobacco producers as it proposes stringent regulations on tobacco product consumers, traders and manufacturers.
These include that packaging of a tobacco product must have a uniform plain colour and texture and that “the brand name and product name may appear on packaging in a standard colour and typeface”.
The company revealed that its direct retail product distribution and delivery operations have been scaled down, leading to concerns over local employment.
Johnny Moloto, the area head of corporate and regulatory affairs for BAT Sub-Saharan Africa, indicated that illicit trade now accounted for more than 70% of all cigarettes consumed in the country, effectively squeezing the legal market’s share to below 30%.
Amid these challenges, BAT has set ambitious goals for its smokeless product category, aiming to reach 50 million consumers by 2030 and for these products to constitute at least 50% of its overall revenue by 2035.
As of December 31, 2023, the company reported that 23.9m consumers were already using its smokeless products, contributing to 16.5% of the group's revenue.
Despite headwinds, BAT is committed to evolving within the tobacco industry, focusing on innovation and sustainability in its product offerings.
The company has now set itself the aim of building a smokeless world by actively migrating smokers from cigarettes to smokeless products.
As the company navigates the turbulent landscape of market regulations and competition, its resilience and strategic direction will be key to its future success in the tobacco sector.
BUSINESS REPORT