BTI — British American Tobacco p.l.c.

Summary of BTI Q2 2025 Earnings Call

1. Key Financial Results and Metrics

• Group Revenue: Increased by 1.8% on a constant currency basis, slightly above expectations.
• Adjusted Gross Profit: Rose by 3%.
• Adjusted Profit from Operations: Grew by 1.9%.
• Adjusted Diluted EPS: Increased by 1.7% to 162.1p (constant currency).
• New Category Contribution Margin: Improved by 280 basis points to 10.6%.
• Smokeless Revenue: Now accounts for 18.2% of group revenue, up 70 basis points year-over-year.
• Share Buyback: Increased by GBP 200 million to GBP 1.1 billion for 2025.

2. Strategic Updates and Business Highlights

• Transformation Progress: Continued focus on quality growth in new categories, particularly in Modern Oral, which saw over 40% growth.
• U.S. Market Recovery: First revenue and profit growth in U.S. combustibles since 2022, with a 3.8% revenue increase.
• New Product Launches: Successful launches of Velo Plus and glo Hilo, with Velo Plus achieving significant market share gains in the U.S.
• Digital Transformation: Strong advancements in cloud adoption and partnerships with tech firms to enhance operational efficiency.

3. Forward Guidance and Outlook

• Full-Year Revenue Guidance: Expected at the top end of the 1% to 2% range.
• Adjusted Profit from Operations (APFO) Guidance: Maintained at 1.5% to 2.5%, reflecting increased investments in new categories.
• Long-Term Growth Target: Aiming for 3% to 5% revenue growth and 4% to 6% operating profit growth by 2026.

4. Bad News, Challenges, or Points of Concern

• Vapour Business Decline: Notable 13% decline in Vapour revenue due to illicit trade in the U.S. and Canada.
• Regulatory Headwinds: Ongoing challenges in markets like Canada where regulations hinder competitive capabilities.
• Market Dynamics: Competitive pressures from aggressive promotional activities by competitors in the U.S. and Europe.
• Inflation and FX Costs: Absorbed GBP 166 million in inflation-related costs, impacting profitability.

5. Notable Q&A Insights

• glo Hilo Launch in Japan: Positive consumer feedback; expected to roll out in key markets by the end of the year.
• Velo Plus Performance: Strong retention rates and market share growth; potential for further distribution gains.
• Fit2Win Program: Aimed at enhancing organizational efficiency with expected annualized savings of GBP 500 million by 2028.
• ITC Hotels Divestment: Ongoing bureaucratic processes delaying the divestment of the hotel stake, which is intended to aid in deleveraging.

This summary encapsulates the key points from BTI's Q2 2025 earnings call, highlighting financial performance, strategic initiatives, and challenges faced by the company.