BTI — British American Tobacco p.l.c.

Summary of BTI Q4 2025 Earnings Call

1. Key Financial Results and Metrics:

• Group Revenue: Increased by 2.1% year-over-year.
• Adjusted Profit: Rose by 3.4%.
• Adjusted Profit from Operations: Grew 2.3%.
• Adjusted Diluted EPS: Up 3.4%.
• New Categories Revenue: Grew by 7%, with Modern Oral up 48%.
• Combustibles Revenue: Increased by 1%, with volume decline offset by price/mix improvements.
• Cash Returns: Announced a 2% increase in dividends and a share buyback program of GBP 1.3 billion for 2026.
• Net Debt to EBITDA Ratio: Reduced to 2.55x, on track to reach the target range of 2x to 2.5x by year-end 2026.

2. Strategic Updates and Business Highlights:

• Consumer Growth: Added 4.7 million smokeless consumers, reaching a total of 34.1 million.
• U.S. Market Performance: Returned to revenue and profit growth for the first time since 2022, with a 4.6% increase in combustibles revenue.
• Velo Plus Success: Achieved over 300% growth and positive category contribution within its first year.
• Investment in Innovation: Continued focus on premium product launches, including Velo Shift and glo Hilo, aimed at capturing market share in the premium segment.
• Fit2Win Program: Expected to deliver GBP 600 million in annualized savings by 2028, with GBP 500 million anticipated by 2027.

3. Forward Guidance and Outlook:

• 2026 Expectations: Anticipated to return to midterm algorithm targets of 3-5% revenue growth, 4-6% adjusted profit growth, and 5-8% EPS growth.
• New Categories Growth: Expected low double-digit revenue growth, driven by Velo and improvements in Vapour and Heated Products.
• U.S. Combustibles: Projected long-term decline of 6-7%, with expectations for stable volumes in Vuse.

4. Bad News, Challenges, or Points of Concern:

• Vapour Category Pressures: Continued challenges from illicit products impacting revenue, particularly in the U.S. and Canada.
• APMEA Region Decline: Total revenue down 7.2%, with significant headwinds in Bangladesh and Australia affecting overall performance.
• Regulatory Challenges: Ongoing difficulties in enforcing regulations against illicit Vapour products in various markets.
• Competitive Pressures: Heightened competition in the Heated Products segment, particularly in the value-for-money category.

5. Notable Q&A Insights:

• Modern Oral Growth: Management expressed optimism about the U.S. market for Modern Oral, driven by strong retention rates and increasing consumer awareness.
• Vapour Performance: Guidance for flat performance in Vapour for 2026, with expectations that enforcement actions will take time to stabilize the market.
• Australia Market Concerns: Management acknowledged the challenges posed by high illicit market share and regulatory pressures, indicating a potential exit strategy if conditions do not improve.
• Duty Drawback Impact: While specific figures were not disclosed, management indicated that the benefits from the duty drawback would likely not increase significantly in 2026 compared to 2025.

This summary encapsulates BTI's financial performance, strategic initiatives, outlook, and challenges, providing a balanced view of the company's current standing and future direction.