BAT share price subdued as group warns of Gulf states tax impact


Full-year revenue to benefit from next-gen products

Shares in British American Tobacco (LON:BATS) have fallen into the red as the company updated investors on its recent performance, flagging impact from tobacco taxes likely to be introduced in several states in the Middle East. The company, however, expects its full-year revenue to benefit from growing contribution from its next-generation products (NGP), which include e-cigarettes.

As of 10:33 GMT, BAT’s share price had added 0.52 percent to 5,018.00p, underperforming the broader UK market, with the benchmark FTSE 100 index currently standing 0.01 percent in the red at 7,499.47 points. The group’s shares have added more than 12 percent to their value over the past year, as compared with an over eight-percent rise in the Footsie.

BAT updates on performance

BAT posted a second-half pre-closing trading update today, reporting that its business had continued to perform in line with expectations and revealing that its full-year earnings per share were likely to benefit from a reduced currency translation tailwind of five percent.

The FTSE 100 tobacco group, however, cautioned that while its second-quarter organic volume was expected to benefit from the phasing of shipments in a number of key markets, that would be partly offset by the impact of the significant excise increase in the Gulf Cooperation Council, which consists of Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates.

The group nevertheless expects its organic revenue in the second half to benefit from growing NGP revenues and good overall pricing in most markets. The update comes after BAT recently signalled confidence in the division which is expected to generate £5 billion in revenue and ‘substantial profit’ by 2022.

Analysts on BAT

Goldman Sachs, which sees the company as a ‘buy,’ set a price target of 5,500p on the shares this week, while Jefferies reaffirmed the company as a ‘buy’ last week, valuing the stock at 5,900p. According to MarketBeat, the FTSE 100 tobacco group currently has a consensus ‘buy’ rating and an average price target of 5,522.65p. 

As of 10:54 GMT, Wednesday, 13 December, British American Tobacco plc share price is 5,021.00p.