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British American Tobacco boosts revenue outlook for 2020

Company aims to expand its ‘new category’ business, including a vapour brand and tobacco heating product.
People walk past the British American Tobacco offices in London, Britain. Image: Stefan Wermuth, Reuters

Lucky Strike-maker British American Tobacco on Wednesday raised its revenue outlook for 2020 to the upper end of its previous forecasts, thanks to a smaller-than-expected hit to cigarette demand from the Covid-19 pandemic.

The world’s second-biggest cigarette maker said the sales impact from the health crisis would be about 2.5%, lower than the 3% it had expected earlier.

The tobacco industry has weathered the pandemic relatively well as lockdowns often allowed for more time to smoke and more money to spend on cigarettes while travel restrictions meant fewer opportunities to smuggle tobacco.

The World Health Organization has said smoking makes it harder for the body to fight off coronaviruses. And smokers who catch Covid-19 are more likely to develop severe illness than non-smokers, the Centers for Disease Control and Prevention has said.

BAT CEO Jack Bowles said: “We continue to be clear that combustible cigarettes pose serious health risks, and the only way to avoid these risks is not to start or to quit.”

“BAT encourages those who would otherwise continue to smoke to switch completely to scientifically substantiated reduced risk alternatives,” Bowles said in a statement.

The company reiterated its aim to expand its “new category” business, which includes vapour brand vype and tobacco heating product glo, to 5 billion pounds ($6.70 billion) in revenue by 2025. BAT also said it expects to increase spending on new categories by 200 million pounds in the second-half of the year.

Regulators in the United States have stepped up their pressure on the vaping industry, with bans there on flavours of certain e-cigarettes, after increased usage by teenagers and a spate of vaping-related illnesses and deaths.

BAT expects industry volume for tobacco products in the United States, its biggest market, to be largely flat in 2020 versus a previous forecast for a fall of 2.5%.

With cigarette brands like Dunhill and Rothmans, BAT expects adjusted revenue growth on a constant currency basis to be at the upper end of its prior forecast of 1% to 3% in 2020.

Other big tobacco firms, including Philip Morris International, Japan Tobacco Inc, Imperial Brands and Swedish Match, have also raised their 2020 forecasts.

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