British American Tobacco Shares Plunge as Regulatory Headwinds and Legal Settlement Impact Profits

British American Tobacco (BAT) witnessed a sharp decline in its share price today, falling nearly 9 per cent after announcing a £6.2 billion provision for lawsuit settlements in Canada and warning of significant regulatory challenges in key markets.

The FTSE 100 tobacco giant reported operating profits of £2.7 billion for 2024, a figure heavily impacted by the substantial legal provision. This stands in stark contrast to the previous year’s £15.8 billion loss, which was attributed to a write-down of its US cigarettes business.

Revenue declined 5.2 per cent to £25.9 billion, primarily due to the company’s strategic exit from Russia and Belarus following the Ukraine conflict, coupled with adverse currency fluctuations. On an underlying constant currency basis, the company managed to achieve a modest 1.3 per cent revenue growth.

The company’s new category products, including Vuse vapes and Glo heating products, demonstrated resilience with an 8.9 per cent sales increase. Traditional combustible tobacco sales inched up by 0.1 per cent, as price increases offset a 5.2 per cent volume decline.

Chief Executive Tadeu Marroco remains optimistic despite mounting challenges in Bangladesh and Australia, maintaining the company’s commitment to achieve medium-term revenue growth of 3-5 per cent and adjusted profit growth of 4-6 per cent by 2026.

The Canadian settlement, which involves BAT alongside competitors Philip Morris International and Japan Tobacco, amounts to C$32.5 billion (£18 billion) and aims to resolve historical product litigation claims. The settlement terms indicate that BAT’s Canadian operations will contribute both existing assets and future performance-based payments.

BAT’s share price closed at £30.95 in London trading, marking it as the FTSE 100’s largest decliner of the day. Despite this setback, the company’s shares have appreciated approximately 30 per cent over the past year, with shareholders benefiting from £28 billion in returns through dividends and share buybacks over the previous five years.