Summary of BTI Q4 2025 Earnings Call

1Key Financial Results and Metrics

Group Revenue: Increased by 2.1% for 2025.

Adjusted Profit: Rose by 3.4%, with adjusted profit from operations growing 2.3%.

Adjusted Diluted EPS: Up 3.4%.

New Categories Revenue: Grew by 7%, primarily driven by modern oral products, which surged 48%.

Combustibles Revenue: Grew 1%, with volume declines offset by strong pricing/mix.

Cash Returns: Announced a 2% increase in dividends and a share buyback of GBP 1.3 billion for 2026.

Net Debt: Reduced to 2.55x adjusted net debt to adjusted EBITDA, on track to meet the target range of 2.0 to 2.5x by year-end.

2Strategic Updates and Business Highlights

Consumer Growth: Added 4.7 million smokeless consumers, totaling 34.1 million, with significant growth in modern oral.

U.S. Market Recovery: Achieved revenue and profit growth for the first time since 2022, with a 4.6% increase in combustibles revenue.

New Product Launches: Successful introduction of Velo Plus, which gained significant market share, and the rollout of Velo Shift and glo Hilo.

Productivity Programs: Continued focus on cost savings, with GBP 1.2 billion in productivity savings since 2023 and a target of GBP 2 billion by 2030.

3Forward Guidance and Outlook

2026 Expectations: Anticipate returning to midterm growth targets of 3-5% revenue growth, 4-6% adjusted profit growth, and 5-8% adjusted diluted EPS growth.

Investment Focus: Continued investment in premium innovations and new categories, with expected low double-digit revenue growth from new categories.

Market Dynamics: Expect stabilization in APMEA and continued growth in U.S. and AME regions, despite ongoing challenges.

4Bad News, Challenges, or Points of Concern

Vapor Market Pressures: Continued decline in vapor revenue due to illicit market pressures, particularly in the U.S. and Canada.

Regulatory Challenges: Ongoing fiscal and regulatory headwinds in markets like Bangladesh and Australia, impacting overall revenue and profits.

Competitive Landscape: Increased competition in heated products and vapor segments, with a noted decline in market share in certain regions.

U.S. Combustibles Decline: Long-term expectation of 6-7% decline in combustible volumes, with a need for ongoing innovation and market adaptation.

5Notable Q&A Insights

Modern Oral Growth: Management expressed confidence in the continued growth of Modern Oral, driven by strong product retention and market expansion.

Vapor Category Outlook: The expectation for vapor revenue to stabilize in 2026 is contingent on effective enforcement against illicit products.

Guidance Clarification: Management highlighted that the guidance for low double-digit growth in new categories considers regulatory impacts and competitive pressures.

Australia Market Concerns: The Australian market remains challenging due to high illicit market share and stringent regulations, with potential for future exit if conditions do not improve.

CapEx and Pricing Strategy: Increased CapEx is focused on new categories, with expectations for stable pricing in combustibles despite competitive pressures. Overall, BTI's earnings call reflected a mix of positive growth in new categories and challenges in traditional markets, with a strategic focus on innovation and regulatory navigation as key to future success.