British American Tobacco shares plunge, as vape products sales double

British American Tobacco (LON:BTAS) announced Thursday their 2017 results with shares dropping 5 percent in early trading.

Operating profit was up 3.7 percent to £5.68 billion, due mainly to the acquisition of Reynolds American in July 2017 and the US tax reforms. Revenue increased 38 percent, while net profit was £37.53 billion compared to £6.25 billion in 2016. 

There was a 2.6 percent decrease in the sales of tobacco products across all regions. However, the cigarette giant is expecting to double sales in vapour and e-cigarettes in 2018, predicting they will boost profit to £1 billion in the unit.

Reynolds acquisition

The acquisition of Reynolds American company now makes them the world’s leading international tobacco and next generation products business.

“The transformational deal to acquire RAI marked a record year in 2017. The Group continued to deliver on its commitment to high single figure constant currency earnings growth, substantially reinforced the long-term sustainability of that growth with the largest acquisition of a tobacco company ever completed and achieved significant success in its Next Generation Products business,” said Richard Burrows, chairman.

The tobacco industry is experiencing major changes and the company is seeing now the fruits of their investments in new alternative products.

BAT recognises the change and is planning to create £5 billion in sales only from the new generation products by 2022.

They are represented in 9 markets in the vaping industry and are leaders in the UK and Poland with their products Vype and Ten Motives. They are planning to strongly improve in the US market.

“The Group’s results in 2017 are testament to our commitment to delivering strong results for shareholders whilst at the same time investing substantially in the long-term future of the business,” said Nicandro Duarte, chief executive.

Shareholders were rewarded with a dividend increase of 15.2 percent to 195.2p, payable in four quarterly dividend payments of 48.8p. 

Share were down 3.61 percent, trading at 4,289.50, as of 12:45 (GMT).