WINSTON-SALEM, N.C. — British American Tobacco (BAT) is writing down approximately $31.5 billion as it speeds up its ongoing transition away from traditional, combustible tobacco products.
The company pointed to a steep decline in the number of cigarette smokers as the major factor behind the impairment charge, The Associated Press reported.
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BAT's goal is to transform into a predominant producer of "smoke-free" products with half its revenue coming from noncombustibles by 2035. FactSet data indicates that combustibles currently make up around 83% of its sales.
"To accelerate the next phase of our transformation journey, we are now committing to 'Building a Smokeless World,'" stated CEO Tadeu Marroco. "We will deploy our global multi-category portfolio to actively encourage smokers to 'Switch to Better' nicotine products, realizing the multi-stakeholder benefits of 'A Better Tomorrow.'"
There is significant growth opportunity in noncombustibles, as just 10 percent of the world's 1 billion smokers currently use "new category" products such as vapor devices, heat-not-burn products and other alternatives, he added.
He noted that the $31.5 billion write-down mainly relates to some of BAT's acquired U.S. combustibles brands as the company assesses their carrying value and useful economic lives over the next 30 years.
"Building on our broad-based performance in 2023, I am clear that now is the right time to further invest to accelerate our transformation. We are making active investment choices to strengthen our U.S. business, accelerate innovation momentum in heated products globally, and enhance capabilities that support our strategic delivery," Marroco said. "These investments will impact in 2024, and alongside continued macro-economic pressures in the U.S., we now expect growth in revenue and adjusted profit from operations of low-single digit on an organic basis at constant rates."
Winston-Salem-based Reynolds American Inc. is a U.S. subsidiary of BAT.