BAT took a £957 million ($1.15 billion) impairment charge related to the transfer of its Russian business, lowering its half-year earnings by a quarter.
The London-based firm, which controlled almost a fourth of the Russian market, said earlier this year that it was in advanced talks with its distributor in the country to sell the business in the wake of Russia’s invasion of Ukraine.
BAT reported a 25 percent drop in profit from operations on a reported basis to £3.68 billion for the six months to June 30 as a result of the charge. The company expects global tobacco industry volume to be down about 3 percent, partly because of the Russia-Ukraine crisis.
In a press release announcing the half-year results, BAT emphasized the growth of its New Categories products and the performance of its combustible business, which continues to grow value share enabled by robust pricing.
“I am very proud that our continued New Categories growth momentum is driving faster transformation, with revenue growth of 45 percent in the first half of 2022, on top of 51 percent growth in fiscal year 2021,” said BAT CEO Jack Bowles. “I am especially proud that the number of consumers using our noncombustible brands has passed the milestone of 20 million in the first half.”
Noncombustible products now represent 14.6 percent of BAT’s revenue.
While acknowledging the geopolitical and macroeconomic challenges, Bowles was upbeat about the outlook for BAT.
“We are not immune, of course, to the increasing macroeconomic pressures, exacerbated by the conflict in Ukraine,” he said. “However, we are well positioned to navigate the current turbulent environment due to our powerful brands, operational agility and continued strong cash generation.”