British American Tobacco (BAT) is to write down the value of some of its US cigarette brands by GBP 25 billion as economic headwinds hit sales in its biggest market, reports the Financial Times.
The group, whose North Carolina-based subsidiary Reynolds American is the second largest US cigarette manufacturer by sales, said smokers were switching to cheaper cigarette brands or quitting altogether, leading to the write-down. Competition from illegally sold disposable cigarettes had also affected sales. The brands affected by the write-down are those that BAT acquired as part of the GBP 40 billion takeover of Reynolds in 2017. These include the Camel, Newport, Natural American Spirit and Pall Mall brands. According to the report, this reduces the value of the affected brands on BAT’s balance sheet by more than a third to GBP 42 billion, compared to just under GBP 67 billion last year.
“I am encouraged that our commercial plans are starting to deliver early signs of portfolio recovery,” said Tadeu Marroco, BAT’s chief executive. BAT said its volume share in the US is still down year-to-date, the group’s commercial plans continue to show signs of recovery with a 0.5 percentage point improvement in cigarette volume share between January and October. Marroco said the write-down was “consistent with our vision to ‘build a smokeless world’”, as the cigarette maker aims to generate half of its revenue from safer nicotine alternatives, such as vapes, by 2035.