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% 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.

2. Strategic 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.

3. Forward 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.

4. Bad 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.

5. Notable 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.