British American Tobacco $BATS (+0,9 %) has announced a strategic realignment towards a predominantly smoke-free business by 2035, as outlined at today's Annual General Meeting (AGM). The company's revised strategy, unveiled in 2023, aims to adapt to the evolving consumer and regulatory landscape, with a focus on agility and precision in execution.
BAT reported a 5.2% decline in Group revenue on a reported basis for 2024, while organic revenue increased by 1.3% at constant exchange rates. The new product category business, which includes smokeless products, saw an increase in contribution of £251 million and achieved a margin of 7.1%.
The company's adjusted organic operating profit increased by 1.4% at constant exchange rates in 2024, with a strong operating cash conversion of 101%. BAT attributes these results to the resilience of its business and people, despite global macroeconomic challenges.
In line with its commitment to a smoke-free future, BAT reported that 29.1 million adults now use its smoke-free products, accounting for 17.5% of Group sales. The company is focused on product innovation to responsibly meet consumer preferences and has achieved profitability in its new category business two years ahead of schedule.
BAT's sustainability strategy has been revised to focus on five impact areas: Tobacco Harm Reduction, Climate, Nature, Circular Economy and Communities. This approach has earned the company a triple-A rating from CDP for its disclosures on climate change, water security and forests in 2024.
The company actively engages with stakeholders to promote tobacco harm reduction and encourages the use of smokeless products. BAT has published Omni™, a manifesto for change, and introduced evidence-based solutions for its vapor devices aimed at preventing underage use, improving product safety and increasing the circularity of devices.
For 2025, BAT expects a return to earnings growth in the U.S. and anticipates revenue growth of approximately 1% and adjusted operating profit growth of 1.5-2.5%, including a 1.5% transactional foreign currency headwind. The company forecasts a translational foreign exchange headwind on adjusted operating profit of 2% for the full year and 3% for the half year. BAT reiterates its medium-term targets of 3-5% sales growth and 4-6% growth in adjusted operating profit on a constant currency basis.
BAT plans to generate more than £50 billion of free cash flow between 2024 and 2030 and is committed to a disciplined capital allocation that balances investment in transformation with shareholder returns. The company has announced a 2% dividend increase and a £900 million share buyback for the year.
The AGM also noted changes to the Board, including the appointment of Soraya Benchikh as Chief Financial Officer and Director and Uta Kemmerich-Keil as Independent Non-Executive Director.
