British American Tobacco Expects One-Off Impairment of £25 Billion

British American Tobacco (BAT) is anticipating a one-off impairment of approximately £25 billion ($31.49 billion) this year. The impairment is attributed to market pressure on some of its combustibles brands in the U.S. as the company aims to enhance its revenue from nontraditional tobacco products.

BAT, a FTSE 100 cigarette manufacturer, which includes well-known brands such as Kent, Dunhill, and Lucky Strike, stated that macroeconomic pressures on combustibles performance in the U.S., along with investments in the noncombustibles business, would result in an accounting noncash adjusting impairment charge of about £25 billion.

The adjustment primarily pertains to certain acquired U.S. combustibles brands. BAT will now evaluate their carrying value and useful economic lives over an estimated period of 30 years. Starting from January, it plans to initiate the amortization of the remaining value of its U.S. combustibles brands.

The company has set a target to achieve a revenue share of up to 50% from noncombustibles by 2035 and intends to continue investing in this sector until 2024.

Due to the strategic shift and pressures in the U.S., BAT expects low single-digit growth in revenue and adjusted profit from operations on an organic basis for the upcoming year. It then anticipates a continuous improvement leading to 3%-5% revenue growth and mid single-digit adjusted profit from operations by 2026.

Chief Executive Tadeu Marroco expressed confidence in the decisions being made, stating that they will drive long-term success and deliver sustainable value for all stakeholders.

For the current year, the company predicts revenue growth at the lower end of its previously guided range of 3%-5% at constant currency rates. It also expects mid single-figure growth in adjusted diluted earnings per share on a constant-currency basis, including a foreign-exchange headwind of around 2%.

BAT reported strong volume and revenue growth in new categories, which is anticipated to reach breakeven broadly two years ahead of schedule.