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British American Tobacco shares fell as much as 10 per cent on Thursday after the maker of Dunhill and Lucky Strike cigarettes made a £6.2bn provision for a Canadian lawsuit and warned about the effect of stricter regulations.
BAT announced the provision as part of its full-year results for 2024. It comes after BAT, together with rivals Philip Morris International and Japan Tobacco, in October made a C$32.5bn (US$22.7bn) settlement proposal to resolve litigation in Canada.
The cigarette makers were ordered to pay C$15.6bn damages in 2015 to compensate smokers for health problems, in the largest damages award in the country’s history.
Under the proposed settlement, an upfront payment funded from cash in the companies will be followed by annual payments, initially worth 85 per cent of net profit in Canada, and reduced every year.
The shares were down 7.7 per cent at lunchtime in London, at £31.37, having at one point been down as much as 10 per cent.
The company forecast its revenue this year would grow by only around 1 per cent, held back by increased excise duty in Bangladesh and new tobacco regulations in Australia. Sales for 2024 declined 5 per cent because of the sale of its businesses in Russia and Belarus and problems in the US market, which it called “challenging” because of the prevalence of illicit vapes.
It expects growth in adjusted operating profit in 2025 of just 1.5 per cent to 2.5 per cent, compared with Japan Tobacco’s 8 per cent and Philip Morris International’s more than 10 per cent.
Tobacco makers face legal challenges over the health damage caused by their products and are grappling with a steady tightening of regulations around the world. Companies have been investing in smoking alternatives but are still heavily reliant on conventional cigarettes to generate profits and return high dividends.
Tadeu Marroco, chief executive, said there were “significant regulatory and fiscal headwinds” that would hamper BAT’s performance this year. But the company would finish 2025 with all the new “innovation pipeline” already deployed in its key markets, he said. New products include heated tobacco, vapes and nicotine pouches. Marroco said the full-year benefits of such products would be clear in 2026.
He reiterated BAT’s midterm guidance for 3 to 5 per cent revenue growth and 4 to 6 per cent growth in adjusted operating profits in 2026. The company also planned a £900mn share buyback this year, it said.
