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BAT Sticks To Forecast As Demand For Tobacco Alternatives Rises

British American Tobacco said it sees 2021 as a 'pivotal year' as it backed its full-year profit and sales forecasts on Tuesday buoyed by strong demand for its 'new categories' products.

Its shares, down 3% this year, rose 1.75% to 2,671 pence in morning trading after the FTSE-listed company also flagged a possible share buyback.

The company said an additional 3.6 million customers used its "new categories" products - e-cigarette, tobacco heating and oral nicotine - in the year to end-September, bringing its total non-combustible user base to 17.1 million.

"2021 is the pivotal year in our transformation journey," CEO Jack Bowles said in a statement, highlighting that after years of losses, products from its new categories business would contribute to overall profits for the first time this year.

New Categories 

The maker of Lucky Strike cigarettes invested more than £346 million ($459.56 million) in new categories in the first half of the year, which helped boost sales by more than 50%.

"We continued to accelerate these investments in the second half which has helped it make a sizeable contribution to revenue growth (this year)," Chief Marketing Officer Kingsley Wheaton told Reuters.

With increased marketing and distribution, BAT's Vuse e-cigarettes gained 6.9 percentage points in market share in 2021.

Its glo tobacco heating products grabbed an extra 4.5 percentage points in market share in their top markets in the year to end-September.

'Net Positive Print'

"After a number of years of disappointment, strong current year momentum continued to build (in the new categories business)," Jefferies analyst Owen Bennett said, adding that all in all it was a "net positive print".

BAT kept its full-year forecast for constant currency revenue growth above 5% and mid-single digit adjusted earnings per share growth in 2021, as it also expects to gain from selling higher priced cigarettes.

It raised its outlook for global tobacco industry volumes to "broadly flat" from down 1.5%. In the United States, it expects volumes to fall by around 5.5%.

The company also said at current valuation it recognises the "clear value" of a buyback, which Bennett said might result in an announcement at the end of this year.

News by Reuters edited by Donna Ahern, Checkout. For more A Brands stories click here. Click subscribe to sign up for the Checkout print edition.

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