British American Tobacco’s share price has been down around 2.5% over the last week, and today’s BATS final results show steady but unspectacular progress, with the group still heavily reliant on traditional cigarettes despite ongoing investment in “new category” products.
Headline BATS results numbers
- Underlying revenue rose 2.1% to £25.6bn
- Underlying operating profit increased 2.3% to £11.3bn
- New category revenue grew 7%
- Combustible tobacco revenues rose in most regions despite declining volumes
Pricing power remains the core driver of the BATS share price rise
The key takeaway is that pricing continues to underpin performance. Cigarette volumes declined in major markets such as the US, but strong price increases more than offset this, highlighting the defensive nature of the tobacco sector.
Hargreaves Lansdown’s head of equity research, Derren Nathan, summed up the mixed picture:
“British American Tobacco’s final results mirrored recent guidance as well as a mix of challenges and progress made over 2025. Commercial actions saw combustible revenues grow as strong pricing more than offset continued volume declines in major markets, including the US.”
However, regional performance was uneven, with revenue in Asia Pacific, the Middle East and Africa falling 7.2% due to higher taxes and stricter regulation.
Transition to smokeless products remains slow
BAT continues to invest heavily in reduced-risk products:
- Smokeless products now represent 18.2% of revenue
- Growth driven by 48% expansion in modern oral products
- Vapes remain under pressure due to illegal competition
Nathan highlighted the challenge facing the shift away from cigarettes:
“Weaning the company off cigarettes is proving harder than originally anticipated… There’s more work to be done to drive the shares higher from these levels.”
Margins in new categories are improving but remain significantly lower than traditional tobacco.
Guidance suggests limited near-term upside
Management left guidance unchanged at the lower end of its medium-term target range, signalling limited catalysts for a re-rating in the near term.
The results reinforce the investment case, with strong cash generation and pricing power on one hand, and slow transformation and regulatory headwinds on the other. BAT remains a dependable defensive stock, though the pace of change may cap near-term share price upside.
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