A plan to offload part of its £15bn stake in Indian cigarette company ITC shines light on BAT

British American Tobacco shares posted their biggest gain in nearly four years after it revealed it was looking to offload some of its £15bn stake in India’s largest cigarette company.

The Lucky Strike and Dunhill manufacturer said it plans to offload part of its 30 per cent stake in ITC.

The potential sale “gives us the opportunity to release and reallocate some capital,” BAT CEO Tadeo Marrocco said.

He added that the company has owned a share in the International Trade Company for more than 100 years, and this shareholding has been subject to many regulatory restrictions.

The prospect of a sell-off sent shares soaring on hopes it would free up cash to distribute to investors.

The potential sale provides us with the opportunity to free up and reallocate some capital,” said BAT CEO Tadeo Marrocco (pictured).

BAT CEO Tadeo Marrocco (pictured) said the potential sale “gives us the opportunity to free up and reallocate some capital”

The stock ended the day up 7.1 per cent, or 165p, at 2,484p.

BAT last launched a £2bn share buyback program in February 2022 but decided not to renew it last year.

“This would be a huge positive, bringing the all-important share buyback timeline closer for investors,” said RBC Capital Markets analyst James Edwards-Jones.

Rival Big Tobacco players were looking to appease investors.

London-listed Imperial Brands has an ongoing £1.1bn share buyback plan, while Altria announced an £800m buyback last week.

BAT’s rise came as it posted a loss of £15.8bn for 2023 versus a profit of £10.5bn the previous year. This came after writing off the value of 27.3 billion pounds of American cigarette brands.

The Camel, Natural American Spirit, Newport and Pall Mall brands – acquired in the £40bn takeover of cigarette giant Reynolds American in 2017 – were worth much less than expected, the company said in December.

However, the charge was higher than the £25 billion the company had originally warned about.

The company blamed this on currency movements. Cigarette companies in general have suffered as consumers shift toward e-cigarettes.

BAT’s revenue was £27bn for the year, down 1.3 per cent on the previous year.

Its “smoke-free” business, which includes e-cigarettes and nicotine pouches, was profitable for the first time, generating £398m.

Sales of BAT’s e-cigarette products rose by about 7 percent in 2023, while sales of nicotine pods rose by more than a third.

The aim was to deflect concerns surrounding the UK’s disposable e-cigarette ban, which aims to address the rise in young people using e-cigarettes.

Marrocco said this won’t have much impact thanks to his company’s refillable electronics products including Vuse.

“Because we have a modest share in disposable e-cigarettes, we will be in a stronger position, because we are leaders in the refill space,” he said.

Looking ahead, BAT said global tobacco sales are expected to decline by 3%, driven by weak performance in the United States.

(tags for translation) Daily Mail

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