Clear The Air News Tobacco Blog Rotating Header Image

British American Tobacco on a roll with innovation, Citi says–872515.html

The medium-term outlook for British American Tobacco is “strong” but the firm is facing earnings downgrades from analysts related to movements in foreign exchange markets and price roll-backs in Australia, one large broker said to clients after the company’s Investor Day.

Nonetheless, innovation is allowing the company to grow market share.

Company on a roll with new products

At its investor day the firm presented two new-to-world innovations, a hybrid device combining actual tobacco and e-cigarettes to improve taste and a new heat-not-burn product. Both were expected to launch in 2016.

Those product innovations were also getting to market at an accelerated pace, as shown by the introduction of its “Tubes” across 27bn sticks, representing approximately 4% of global volumes in 2014.

The firm was also beginning to mix its innovations.

“Although “innovation” is an old story at BAT, we believe that BAT has significantly upped its game, and in future it should be able to roll out new ideas even faster,” the analyst team led by Adam Spielman said in a research note sent to clients.

Headwinds blowing from emerging markets

Nonetheless, price hikes Down Under were impossible to carry out in September and profits in South Africa were on the slide, the analysts at Citi added.

The weakening Brazilian real and other currencies also meant the total FX ‘hit’ for the fiscal year 2015 was now seen rising to 16% versus prior guidance for 15%.

Citi kept its recommendation on the shares unchanged at ‘buy’ with a target price of 4000p

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>