British American Tobacco said today it would take an around £25 billion impairment charge as it reassessed the value of some of its US cigarette brands.
The maker of Lucky Strike and Dunhill cigarettes said challenges in the US, where a difficult economy and popularity of often illicit disposable vapes have weighed on its business, would drag on its growth in both 2023 and 2024.
It said economic challenges affecting the US business, which have seen some inflation-weary consumers downgrade to cheaper brands, had contributed to the £25 billion non-cash adjusting impairment charge.
"This accounting adjustment mainly relates to some of our acquired US combustibles brands, as we now assess their carrying value and useful economic lives over an estimated period of 30 years," BAT said in its pre-close trading update.
It added that it would start amortising the remaining value of its US combustibles brands in 2024.
BAT maintained its 2023 full-year revenue forecast at 3-5% organic growth in constant currency terms, but added this would likely be at the lower end of the range because of pressures in the US and planned investment into its newer products, including vapes and oral nicotine.
It said that these factors also meant it would expect low single digit growth in revenue and adjusted profit from operations in 2024.
British American Tobacco CEO Tadeu Marroco said today that it had received some proceeds from the sale of its Russian and Belarusian businesses, but this was "far away" from their true value.
BAT had agreed to sell the assets to a consortium led by its Russian local management team in September, ending an 18-month long process to exit the world's fourth-largest cigarette market following Russia's invasion of Ukraine.
At the time, BAT did not disclose the sale price or whether the deal included a clause allowing the company to buy back the businesses at a later date.
Marroco told analysts on Wednesday that BAT had taken a "big hit" on the sale.
"We had some proceeds but overall you cannot lose perspective, that [they were] far away from the real value of the business given the circumstance that the deal was done," he said.
He added that the sale did include a buyback option, but the Russian authorities required this be restricted to two years, making it unlikely BAT would take up the option.
BAT had already recognised £629m in impairments and associated costs related to the sale by the time the deal was announced.
