British American Tobacco (BAT) has stated that it is on course to reach its financial expectations for the current financial year, despite concerns over illegal vapes in the US.

The firm, which owns brands including Lucky Strike and Dunhill, said its delivery for the first half of the year was on track with its expectations, after stating that it expects to reach low-single digit revenue and adjusted profit in February.

It added that it is driving a further improvement in its new category profitability, through its quality growth focus, with acceleration expected in this region.

However, with cigarette sales falling in the US and a "lack of effective enforcement" against illegal vaping products, BAT has warned that revenue and profit could be impacted in its half-year results.

Chief executive at BAT, Tadeu Marroco, said: "Our year-to-date performance is in line with our expectations, and we are on track to deliver our guidance of low-single digit revenue and adjusted profit from operations growth on an organic, constant currency basis in 2024.

"As previously highlighted, we expect our performance to be second-half weighted, mainly driven by wholesaler inventory movements related to continued investment in our US commercial actions, as well as the phasing of new launches.

"Our guidance also reflects ongoing macro-economic pressures, particularly in the US market and continued lack of effective enforcement against the growing illicit vapour segment. As a result, we expect our H1 revenue and adjusted profit from operations to be down by low-single digits on an organic, constant currency basis."

Looking towards the rest of the financial year, BAT said it expects "growing momentum" in the second half, enabled by investments in new categories.

It added that it was continuing its journey to building a "smokeless world", while improving its performance to delivery between 3-5% revenue and mid-single digit profit by 2026.

Investment director at AJ Bell, Russ Mould, said: "Guidance for a decline in first-half revenue and profit shows that even companies with addictive products aren’t always guaranteed to do well. BAT continues to struggle in the US thanks to consumers buckling under the pressure of high interest rates which has impacted spending decisions, together with the rise of illegal vapes. The company even had a little dig at the authorities for saying there is ‘continued lack of effective enforcement’ against illegal vapes.

"With the US tobacco and vape industry undergoing a shift in normal buying patterns, it’s only natural for wholesalers to change their ordering habits and that’s hurt BAT. At the same time, the company is investing in the US to strengthen its longer-term position, meaning it will have to lean more on other geographic regions to drive profits near-term."

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