(Bloomberg) -- British American Tobacco Plc said it’s unlikely to hit a £5 billion ($6.4 billion) revenue target in 2025 for vapes, heated tobacco and nicotine pouches, blaming the lack of a clampdown on illegal single-use products in the US.
Chief Executive Officer Tadeu Marroco told reporters on a call that the legal vaping market in the US was shrinking, while “all the growth in vapour is coming from these illegal products.”
The London-based maker of Dunhill, Lucky Strike and Pall Mall cigarettes said revenue fell 8% to £12.3 billion for the first half of the year, missing analyst estimates. Operating profit dropped 28% to £4.3 billion, also falling short of expectations.
However, the company stuck to guidance for 2024, which helped BAT’s shares rise as much as 2.6% in early London trading. They’ve now gained 15% so far this year.
BAT is battling for market share in tobacco alternatives as demand for cigarettes cools around the world, but it’s lagging rivals such as Philip Morris International Inc., where alternatives account for a greater proportion of sales. PMI on Tuesday raised its forecast for annual profit growth following strong demand for its Zyn nicotine pouches.
BAT has already written down the value of some of its US cigarette brands by £27.3 billion as people increasingly quit smoking or switch to cheaper brands or alternatives.
Marroco defended BAT’s strategy of investing heavily in several new categories, saying an increasing number of customers are now using more than one type of BAT product. “I cannot be talking much about competitors, but in reality our strategy is proving to be the right one,” he said.
The sale of its businesses in Russia and Belarus also affected the performance, BAT added.
(Updates with shares, CEO comments and additional detail.)
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