British American Tobacco (BATS) Trading Update summary

Financial performance and guidance

• Year-to-date revenue is slightly ahead of previous guidance, with full-year revenue growth now expected at 1–2% and adjusted profit from operations (APFO) growth at 1.5–2.5% for 2025, weighted to H2.

• U.S. business is returning to revenue and profit growth in both H1 and FY25, driven by improved combustibles and strong modern oral performance, particularly from Velo Plus.

• Modern Oral segment, led by Velo, shows robust global growth, with Velo Plus achieving triple-digit revenue growth and significant market share gains in the U.S.

• Group revenue and APFO growth are impacted by regulatory and tax headwinds in Bangladesh and Australia, expected to reduce 2025 growth by around 1% and 2% respectively.

• Strong cash generation supports increased share buybacks to GBP 1.1 billion in 2025, progressive dividend, and deleveraging to a 2–2.5x net debt/EBITDA target by end 2026.

Regional and category performance

• U.S. combustibles volume and value share are up, with strong gains from Natural American Spirit and Lucky Strike, especially outside the deep discount segment.

• AME region shows resilient combustibles performance, led by Brazil, Turkey, and Romania, while APAC faces headwinds from regulatory changes in Bangladesh and Australia.

• Velo's global volume share in Modern Oral rose by 350bps to 29.7% in top markets, with strong leadership in AME and robust performance in Scandinavia, UK, and Poland.

• Vapor revenue is expected to decline by mid-teens in H1 due to illicit trade and focus on profit pools, but new product rollouts like Vuse Ultra are anticipated to drive H2 recovery.

• New category revenue growth is expected to accelerate to mid-single digits for the full year, mainly from innovation rollouts in H2, with double-digit growth when excluding U.S. and Canada Vapour markets.

Operational efficiency and capital allocation

• Operating cash flow conversion is expected to exceed 90% in 2025, reflecting strong cash discipline.

• Interest expense guidance remains at GBP 1.8 billion, reflecting refinancing costs and recent ITC stake sale timing.

• Gross capital expenditure for 2025 is projected at approximately £650 million.

• Partial monetization of the ITC stake has increased financial flexibility.

• Capital allocation remains balanced, with a focus on progressive dividends and sustainable share buybacks.