British American Tobacco said it expects a one-off impairment of around 25 billion pounds ($31.49 billion) this year due to market pressure on some of its combustibles brands in the U.S. as it tries to increase revenue from nontraditional tobacco products.
The shares dropped 7.9% in premarket trading Wednesday.
The FTSE 100 cigarette maker—which houses the Kent, Dunhill and Lucky Strike brands among its portfolio—said macroeconomic pressures on its combustibles performance in the U.S. and investments in its noncombustibles business would lead to an accounting noncash adjusting impairment charge of around GBP25 billion.
It said the adjustment mainly relates to some of its acquired U.S. combustibles brands, and it will now assess their carrying value and useful economic lives over an estimated period of 30 years. It plans to start amortization of the remaining value of its U.S. combustibles brands from January.
BATs said it targets a revenue share of up to 50% for noncombustibles revenue by 2035, and would continue to invest in the sector into 2024.
On the back of the strategy shift and U.S. pressures, it expects low single-digit growth in revenue and adjusted profit from operations on an organic basis for the upcoming year.
It then expects a progressive improvement to 3%-5% revenue growth and mid single-digit adjusted profit from operations by 2026.
“I am confident that the choices we are making today will drive our long-term success and deliver sustainable value for all of our stakeholders,” Chief Executive Tadeu Marroco said.
For this year, the company said it expects revenue growth at the low end of its previously guided 3%-5% range at constant currency. It further expects mid single-figure adjusted diluted earnings per share growth on a constant-currency basis, including around a 2% transactional foreign-exchange headwind.
It reported strong volume and revenue growth in new categories, which it expects to be broadly breakeven, two years ahead of schedule.
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