Yahoo Finance FTSE 100: British American Tobacco takes £957m hit from Russia exit
Shares in British American Tobacco (BATS.L) gained on Wednesday after reporting a 25% drop in profits in the first half of the year following its exit from Russia.
The FTSE 100 (^FTSE) Lucky Strike cigarette maker reported a £957m ($1.2bn) impairment charge related to the transfer of its Russian business.
The tobacco giant which also owns the Camel, Dunhill and Vuse vape brands, controlled nearly a quarter of the Russian market.
In June it announced it was in advanced talks with its distributor in the country to sell the business after the invasion of Ukraine. It said that no agreement to transfer the shares has been entered into.
Profits from operations declined by a quarter to £3.7bn in the six months to 30 June, largely as a result of the charge.
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On the full-year guidance, it said it expects worldwide sales of tobacco by volume to be down about 3%, partly due to the Ukraine crisis and decline in the US market amid a vaping boom.
Company shares dipped 0.3% following the announcement before ticking up 0.3% in mid-morning trade in London.
Its half-year results on Wednesday showed revenues jumped 5.7% to £12.9bn, pushed higher by price increases and a steady demand for its vaping and oral nicotine products.
The group stuck by its full-year guidance for revenues to grow by between 2% and 4%.
"Tobacco will always be a controversial industry, but BAT is making tangible progress toward a future where its products are less harmful," said Steve Clayton, fund manager at Hargreaves Lansdown Select. "In the meantime, the group’s ability to churn out reliable cash flows and dividends remains unimpeded and with debts falling away the financial appeal of the group is improving."
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Chief executive Jack Bowles said: "I am very proud that our continued New Categories growth momentum is driving Faster Transformation, with revenue growth of 45% in the first half of 2022, on top of 51% growth in FY2021. We are delivering both strong operational performance and transforming the business,"
Bowel added BAT was not immune to increasing macro-economic pressures, which had been exacerbated by the conflict in Ukraine, saying it was "well positioned to navigate the current turbulent environment due to our powerful brands, operational agility and continued strong cash generation".
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