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Tax cuts bolster BAT

11 Jan 2018. British American Tobacco (BAT) has said recently passed U.S. tax cuts could increase earnings per share by 6 per cent in 2018, supporting its dedication to high-single-digit earnings growth and investment in next-generation products, Reuters reported.

BAT announced that the tax reform will not affect its underlying effective tax rate for 2017, which is expected to be around 30 per cent. However, the group expects the tax cuts to decrease the effective tax rate percentage to the twenties. BAT also stated that it expects "that the changes will result in a non-cash exceptional tax credit as a result of the revaluation of deferred tax balances arising from the acquisition of Reynolds American Inc. (RAI)".

According to Jefferies analysts, the 6 per cent increase is equivalent to about GBP 400 million (USD 541 million) or 2 per cent of sales. They indicated that the increase could help BAT contend with Philip Morris International (PMI) on the next-generation product market, Reuters reported.

Philip Morris and BAT are expected to introduce their next-generation products to more markets, according to Reuters.