BATS British American Tobacco Plc

   By Carlo Martuscelli 
 

British American Tobacco PLC (BATS.LN) reported its 2017 results on Thursday. The seemingly irreversible decline in the volume of tobacco products sold continued, which likely contributed to BAT's share price falling by as much as 5.8% in trading. Here's what we watched:

REVENUE: The tobacco major missed revenue expectations, with a reported figure of 20.29 billion pounds ($28.31 billion). Revenue was forecast to come in at GBP20.59 billion, according to a consensus estimate provided by FactSet.

PRETAX PROFIT: The producer of Lucky Strike and Dunhill cigarettes was expected to report GBP7.81 billion in profit before tax. BAT greatly exceeded those expectations, reporting GBP29.59 billion in profit, although the sharp rise was mainly on gains related to its acquisition of Reynolds American Inc.

WHAT WE WATCHED

REDUCED-RISK PRODUCTS: The company said that like-for-like adjusted revenue growth was driven by its next-generation products--a category that includes reduced-risk products such as non-burn tobacco and vapor cigarettes--as well as by pricing. It said that it sees GBP1 billion coming from this category in 2018, with the figure reaching GBP5 billion in 2022.

VOLUME: Growth in volume of units sold, a target which Jefferies called the "holy grail" for tobacco companies in an increasingly health-conscious society, was elusive for BAT. The company said that the volume of cigarette and tobacco-heating products sold fell by 2.6% on a like-for-like basis. This was still better than the market, which according to BAT declined by an estimated 3.5%.

Write to Carlo Martuscelli at carlo.martuscelli@dowjones.com

(END) Dow Jones Newswires

February 22, 2018 07:30 ET (12:30 GMT)

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