Camel cigarette maker to take $31.5 billion write-down

By Steve Goldstein

British American Tobacco shares slump on impairment and write-down

British American Tobacco shares slumped 8% as the cigarette maker said it will write down the value of its cigarette brands by GBP25 billion ($31.5 billion).

The company (UK:BATS) (BTI) said the write-down is on its acquired U.S. combustibles brands, as it assesses their value over 30 years. U.S. brands it holds include Camel and Newport.

According to data from Calcbench, it's the largest write-down of a U.S.-listed company since AOL's $35.6 billion write-off in 2014.

Rivals including Altria (MO) and Philip Morris International (PM) traded lower in premarket action.

"The accounting is basically catching up with reality of the U.S. market," CEO Tadeu Marroco said on a conference call. "It's very difficult to defend the existence of a finite value for some of these combustible brands in the U.S. that equates to almost GBP80 billion in our balance sheet."

He did add that the cigarette business may still exist in 30 years.

The company, which said its 2023 earnings per share will be in line with previous guidance on low-end organic revenue growth, said its U.S. business next year will be hit by macroeconomic pressures on the combustibles market as well as competing demand from illicit disposable vapes, as Marroco repeatedly called for tougher Food and Drug Administration enforcement that he doesn't expect to occur.

The company is forecasting low-single-digit revenue and adjusted profit from operations growth next year, and the performance to be weighted toward the second half.

The company said it will take until 2026 to get to 3% to 5% organic revenue growth and mid-single-digit adjusted profit from operations growth.

The company is shifting its focus to noncombustible products like vaping. It's looking to have half of its revenue come from noncombustible products by 2035 and said its new generation products will be profitable next year.

It also said its adjusted net debt-to-EBITDA ratio will be 2.7 by the end of the year, which analysts at Citi took to mean a share buyback was unlikely until the first half of next year at the earliest.

-Steve Goldstein

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12-06-23 0838ET

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