Gloomy prospects of BAT forced to suspend buyback of shares
2023.02.09 08:12
Gloomy prospects of BAT forced to suspend buyback of shares
By Ray Johnson
Budrigannews.com – British American Tobacco shares (LON:) sank to their lowest level in over a year on Thursday as the company was forced to suspend share buybacks due to the poor outlook for its core sectors.
In a statement, chief financial officer Tadeu Marroco said, “Given our incremental investment plans in 2023 to further accelerate our transformation, and in light of the uncertain macro environment, higher interest rates, outstanding litigation and regulatory matters, the Board has decided to prioritize strengthening the balance sheet.” He added that doing so would enable the company to reach its debt reduction target more quickly.
By the end of last year, the company had to refinance maturing debts at higher interest rates, which resulted in a rise in net debt to over £38 billion (£1 = $1.2148) and an increase in net finance costs of more than 10% to £1.64 billion.
At Wednesday’s closing price, BAT’s dividend will still rise by 6% to 230.9p per share, yielding more than 9%.
BAT stated that it was making good progress operationally in its switch from traditional tobacco products to new-generation products, whose share of total revenue increased to 14.8% from 12.4% in 2021. Even though it noted a slowdown in the primary U.S. market throughout the course of the year, the company is also producing fewer cigarettes but is making more money on each one. Earnings per share rose 5.8% to 371.4p as a result of a 90 basis point increase in the adjusted operating margin over the course of the year.
Despite this, the global tobacco industry continues to face pressure as more people quit smoking. The organization anticipates that global volumes will decrease by 2% this year, limiting organic sales growth to 3% to 5% in constant currencies. It anticipates a 5% increase in earnings per share, with the majority of that growth occurring in the second half. Returning from its lows in 2022 is expected to have a negative impact of 2% on this year’s reported.
In London, BAT stock had fallen to its lowest level since January of last year at 05:20 ET (10:20 GMT).
