British American Tobacco (BAT) has seen its share price drop by 3% after it stated that its global cigarette industry volume is expected to be down by 2.5% in the full year, after previously setting guidance at 2%.

In its trading update for the first half of its financial year, the firm said its accelerating new category revenue growth was led by its modern oral and vapour divisions, and now expects mid-teen revenue growth in this period and in the full year.

Furthermore, it has recorded "strong US revenue and profit growth" driven by combustibles, modern oral and vapour, although this performance is expected to be skewed to H1.

BAT also stated that its profit delivery is set to be weighted to the second half, as it looks to stabilise its performance in APMEA.

In its outlook, the tobacco firm said it expects its medium term revenue guidance range to reach between 3% and 5%, while its adjusted profit from operations is set to increase by between 4% and 6%.

It also expects its adjusted diluted earnings per share growth to be between 5% and 8%.

CEO at BAT, Tadeu Marroco, stated: "I am pleased that our full-year delivery remains firmly on track. We are continuing to drive good momentum, and are confident in our ability to sustainably deliver our mid-term algorithm and strong cash returns for shareholders.

“In the US, our robust delivery is driven by combustibles, vapour and an excellent modern oral performance. The strength of our multi-category portfolio and enhanced commercial execution in the world's largest nicotine value pool reinforces our confidence in future delivery.

“In new categories, revenue growth is accelerating and we now expect to deliver mid-teens for 2026. We continue to prioritise investment in our most profitable value pools, driving strong contribution growth.”

Investment director at AJ Bell, Russ Mould, said that people often consider tobacco and vaping companies to be “‘sleep at night’ investments” offering no drama and delivering slow and steady returns.”

However, he concluded: "BAT’s latest update could cause a few nightmares as a chunk of its business isn’t as good as expected.

“It is guiding for full-year results to be at the lower end of its medium-term guidance ranges, weighed down by expectations for cigarette volumes to decline at a faster rate than previously thought.

“So-called ‘new category’ product demand, which includes vaping and heated tobacco products, is picking up. That should be good news to investors, yet it appears the market had expected the tobacco cash cow to remain stronger for longer.”

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