British American Tobacco plans to cut 2 300 jobs as cigarette sales continue to decline in major markets and US President Donald Trump vows to tighten restrictions on new alternatives to smoking.
BAT expects to complete the job cuts, which will affect one in five management positions, by January, the company said Thursday. The company employed more than 95 000 people in 2018. The stock rose as much as 1.1% in London.
Five months into the job, chief executive officer Jack Bowles is setting out to transform BAT as cigarette consumption drops and the company’s portfolio of alternatives underperforms. Rival Japan Tobacco recently announced plans to eliminate 3 720 positions over three years as cigarette makers struggle to deal with the shift in smoking to vaping.
The move also comes as after rival Philip Morris International said it approached Altria Group about reuniting after a split about a decade ago. The move would create a global tobacco giant that would dwarf BAT.
The British company has tempered the outlook for growth of smoking alternatives. The cost-saving program will help it reach its goal of getting 5 billion pounds in revenue from new products by 2023 or 2024, the company said.
The Lucky Strike maker produces vaping products including Vype and Vuse. The company also sells devices that heat rather than burn tobacco under the Glo brand.
Shares of the London-based company have lost about half of their value since their peak in 2017 after the US Food and Drug Administration said it might require cigarette makers to reduce nicotine in cigarettes to nonaddictive levels. The FDA also made pronouncements against menthol in cigarettes, though hasn’t followed it up with new restrictions.
Menthol cigarettes sold in the US account for about a quarter of BAT’s profit, according to Morgan Stanley analyst Richard Taylor. The FDA’s statement Wednesday that it plans to ban flavors including menthol in vaping products will increase concern about an impending prohibition on that substance in cigarettes, too, he wrote.
© 2019 Bloomberg L.P.