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  • BAT Sells $1.5B Stake in ITC

    BAT Sells $1.5B Stake in ITC

    Yesterday (May 28), British American Tobacco said it sold a $1.5 billion stake in Indian consumer goods company ITC at 413 Indian rupees per share. The company sold 313 million shares in ITC, representing 2.5% of ITC, according to the term sheet. This final amount exceeded its initial plan to sell up to 290 million shares in the deal, valued at approximately $1.4 billion.

    According to Reuters, the final sale price represented a 4.8% discount to ITC’s closing price of 433.90 rupees ($5.21) on Tuesday. Shares of ITC dropped nearly 3% to 421.70 rupees ($5.06) on Wednesday. BAT will remain ITC’s largest shareholder after the deal, according to LSEG data. Last year, BAT sold 436.9 million shares, or roughly 3.5% of ITC’s outstanding shares, for about $2 billion in what was India’s third-largest block deal.

    BAT said it would increase its 2025 $1.5 billion share buyback program by £200 million as a result of the deal, which is not expected to have any other impact on its annual outlook.

  • BAT Responds to ITC Speculation

    BAT Responds to ITC Speculation

    British American Tobacco responded to the recent speculation relating to a potential disposal of part of its shareholding in ITC Limited. “BAT confirms that it is evaluating a possible disposal of a small part of BAT’s shareholding in ITC by means of an on-market trade,” the company said in a press release. “There can be no certainty that any such transaction will proceed, nor can there be any certainty as to the terms of any potential transaction. A further announcement will be made if and when appropriate.”

    The announcement was made on behalf of British American Tobacco by Caroline Ferland, Company Secretary, who likewise said the announcement contained inside information in relation to British American Tobacco for the purposes of Article 7 of the Market Abuse Regulation.

    “The securities referred to herein will not be, and have not been, registered under the United States Securities Act of 1933, as amended and may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements of the Securities Act,” the company said.

    BAT is currently ITC’s top investor, with a 20.3% stake according to LSEG data. Last year BAT sold 436.9 million shares, or roughly 3.5% of ITC’s outstanding shares, for about $2 billion in what was India’s third-largest block deal ever.

  • ITC Misses Profit Estimate

    ITC Misses Profit Estimate

    ITC’s profit rose 3 percent to INR50.78 billion ($604.2 million) in the quarter that ended Sept. 30, missing estimates of INR51.14 billion, reports Reuters. The company cited subdued demand conditions, unusually heavy rains in parts of India and a sharp escalation in certain input costs, among other factors.

    Higher prices of raw materials, such as tobacco leaf and crude oil, also weighed on the consumer goods sector’s earnings for the July-September period. The increase in leaf tobacco prices was partly mitigated through improved mix, calibrated pricing and strategic cost management, according to ITC.

    In the cigarette business, net segment revenue was up 7.3 percent. ITC said the business continues to counter illicit trade and make strategic portfolio and market interventions “with focus on competitive belts to reinforce market standing.”

    The company also noted in a statement that recent stability in cigarette taxes, backed by deterrent enforcement, enabled volume recovery for the legal cigarette industry from illicit trade, leading to higher demand for Indian tobaccos and bolstering revenue to the exchequer from the tobacco sector.

  • Cigarette Business Boosts ITC Performance

    Cigarette Business Boosts ITC Performance

    Photo: sdx15

    Higher cigarettes sales boosted ITC’s overall revenue from operations 7.2 percent to INR182.20 billion ($2.17 billion).

    Net cigarette segment revenue grew 7 percent and segment profit before interest and tax was up 6.5 percent year on year.

    In a statement, ITC said it fortified its product portfolio through “innovation and democratizing premiumization across segments backed by superior on-ground execution.”

    The company reported strong performance in its differentiated variants and premium segment and  sequential improvement in its value segment.

    It said it mitigated the sharp escalation in costs of leaf tobacco and certain other inputs through improved mix, strategic cost management and calibrated pricing.

    The company attributed the strong performance of its cigarette business in part to the India’s stable tax environment.

    “ s seen in the past, stability in taxes on cigarettes, backed by deterrent actions by enforcement agencies, enables volume recovery for the legal cigarette industry from illicit trade leading to higher demand for Indian tobaccos and bolstering revenue to the exchequer from the tobacco sector,”  the company wrote.

  • Shareholders Approve Hotels Demerger

    Shareholders Approve Hotels Demerger

    Timon Schneider/Wirestock

    Shareholders on May 6 approved ITC’s plan to demerge its hotels business, reports Reuters.

    The company, which has a substantial cigarette business, announced the demerger plan in July last year and later said that the new entity would be tentatively listed.

    In May, proxy advisory firms Stakeholders Empowerment Services and InGovern Research Services asked shareholders to support the proposal, while Institutional Investor Advisory Services opposed the move.

    The hotels business contributed 4 percent to ITC’s fiscal year 2024 revenue, while its mainstay consumer staples business made up 71 percent of the topline.

  • ITC Reports Growth in Cigarette Business

    ITC Reports Growth in Cigarette Business

    Timon Schneider/Wirestock

    ITC reported gross Revenue of INR694.46 billion ($8.34 billion) for the 12 months that ended March 31, up 6.8 percent over the comparable period a year earlier. Net revenue of conglomerate’s cigarette businesses was up 7.1 percent.

    “After a period of sustained growth momentum, the business witnessed consolidation in volumes on a high base amidst subdued demand conditions in the overall consumption space, even as illicit trade remained at elevated levels,” the company wrote in a statement.

    “Differentiated and premium offerings saw robust traction during the year. Sharp escalation in leaf tobacco prices and other inputs, along with increase in taxes were largely mitigated through improved mix, strategic cost management and calibrated pricing.”

    During the reporting period, ITC launched several new cigarette brands, including Classic Alphatec, Classic Icon and Gold Flake Indie Mint.

    The company continues to be concerned about the strength of the illicit market. While recent stability in cigarette taxes has enabled the legal cigarette industry to claw back some of the volumes lost to illegal traders, India remains the world’s third largest illicit cigarette market, according to ITC, with tax-avoiding products accounting for roughly one-third of the market.

    The company said it continues to engage with policy makers for a framework of evidence-based regulations and taxation policies that balance India’s economic imperatives and tobacco control objectives.

  • ITC Shares Jump on BAT Sale

    ITC Shares Jump on BAT Sale

    Timon Schneider/Wirestock

    ITC’s share price jumped more than 8 percent on March 13 after British American Tobacco sold a $2 billion stake in the Indian conglomerate, reports Reuters.

    The share price had initially fallen in the wake of BAT’s original announcement, as investors were uncertain of the transaction’s conditions.

    The sale of 436.9 million shares, representing about 3.5 percent of ITC’s outstanding shares, still leaves BAT with a stake of more than 25 percent in the company.

    Cigarettes are ITC’s largest business, accounting for more than 40 percent of its revenue. The company has been working to consolidate its business, with plans to spin off its hotel business.

    BAT said it intends to use the net proceeds to buy back BAT shares over a period ending December 2025, starting with £700 million in 2024. “This will enable the allocation of operating cashflow to fund investment in our transformation, continue to deleverage towards our new target range of 2-2.5x adjusted net debt/adjusted EBITDA, while also maintaining a progressive dividend and supporting a sustainable share buyback,” the company wrote on its website.

  • BAT India to Sell Shares of ITC

    BAT India to Sell Shares of ITC

    Image: Tobacco Reporter archive

    BAT’s wholly owned subsidiary Tobacco Manufacturers (India) intends to sell up to 436,851,457 ordinary shares in ITC to institutional investors. The trade shares represent up to approximately 3.5 percent of ITC’s issued ordinary share capital.

    Following completion of the proposed block trade, BAT’s shareholding in ITC will be approximately 25.5 percent.

    BAT intends to use the net proceeds of the trade to buy back BAT shares over a period ending December 2025, starting with £700 million ($892.9 million) in 2024. BAT will continue to allocate operating cashflow to fund investment in its transformation and to further deleverage.

    Going forward, the key elements of capital allocation at BAT will include continued investment in its transformation; progressive dividends; continued deleverage to a new range of 2 times to 2.5 times adjusted net debt/adjusted EBITDA; and sustainable share buybacks, according to the company.

    “I am confident that ITC, under the stewardship of its current management, will continue to create further value for its shareholders,” said BAT CEO Tadeu Marroco in a statement. “We look forward to remaining important shareholders in ITC as it continues its journey of growth. With this transaction, BAT can accelerate the start of a sustainable buyback while enabling us to continue to deleverage toward a new target range of 2 [times] to 2.5 times adjusted net debt/adjusted EBITDA.”

  • Write-Down Weighs on Results

    Write-Down Weighs on Results

    Photo: BAT

    British American Tobacco reported a loss of £15.75 billion for 2023. The company’s results were heavily impacted by its decision last year to write down the value of some its traditional cigarette brands in the United States to reflect the diminishing outlook for combustible tobacco products.

    Revenue was £27.28 billion, dragged by the sale of its businesses in Russia and Belarus, foreign-exchange pressures and lower cigarette volumes, and partially offset by the increased new categories revenue, according to The Wall Street Journal.

    Revenue from ‘new categories’ rose to £3.35 billion, up 21 percent from 2022 on an organic basis.

    “2023 was another year of resilient financial performance and delivery in line with our guidance, underpinned by our global footprint and multi-category strategy, despite a challenging macro-environment, said BAT CEO Tadeu Marroco in a statement.

    “New categories delivered continued volume-led revenue growth and increased profitability, driven by Vuse and Velo. As a result, our new categories portfolio has turned profitable two years ahead of our original target.

    “In combustibles, our commercial plans in the U.S. are enabling early signs of portfolio recovery.” The company’s Africa and Middle East business performed well in 2023, as did BAT’s Asia Pacific/Middle East/Africa region, according to Marroco, who credited strong revenue and profit performance, along with a well-balanced portfolio.

    2023 was another year of resilient financial performance and delivery in line with our guidance, underpinned by our global footprint and multi-category strategy, despite a challenging macro-environment.

    Tadeu Marroco, CEO, BAT

    During the presentation of BAT’s results, Marocco also suggested the company would sell some it shareholding in ITC, the Indian consumer goods giant that makes much of its revenue from cigarettes but also runs hotels and a paper business, among other operations.

    Such a sale would allow BAT to pay down debt and accelerate toward the leverage range at which it could resume the share buybacks that some investors have been pressing for. BAT owns approximately one-third of ITC and would need to retain 25 percent to keep its veto rights.

    In related news, BAT announced that it has submitted an modified risk tobacco product application to the U.S. Food and Drug Administration to make certain health claims about its Glo Hyper Pro tobacco heating device, which the company launched in Japan, Italy and Poland earlier this year.

  • Profits Up at Indian Cigarette Makers

    Profits Up at Indian Cigarette Makers

    Image: RODWORKS

    ITC’s reported a profit of INR55.72 billion ($670.3 million) for the three months that ended Dec. 31, up nearly 11 percent over the comparable 2023 period, the company announced on its website.

    The consumer goods giant benefited from higher demand for its cigarettes as a crackdown on the smuggling of international cigarette brands reduced competition. A sharp escalation in costs of leaf tobacco and certain other inputs, along with increase in taxes were largely mitigated through improved mix, strategic cost management and calibrated pricing.

    The company’s cigarette business, which contributes more than 40 percent of ITC’s top line, grew 3.6 percent over the period. Its paperboards, paper and packaging business, by contrast, struggled with competition from China and sluggish economic conditions in some of its export markets. The segment’s revenue declined almost 10 percent.

    ITC’s hotel business, which the conglomerate plans to spin off into a separate entity, reported  an 18 percent jump in revenue, driven by a strong revival in domestic tourism and heightened demand from corporate bookings.

    ITC competitor Godfrey Phillips India (GPI) also reported improved performance for the third quarter, according to Reuters. The company posted a consolidated net profit of INR2.12 billion, up 6.6 percent over the comparable 2023 quarter. Total revenue from operations rose 34 percent to 14.88 billion rupees, with the company’s core cigarettes segment registering a growth of 37 percent.

    GPI attributed its performance to growth in its core segment and easing expenses. The company manufactures and distributes Marlboro-branded cigarettes under a license agreement with PMI.

    The growth in the cigarette segment was led by the Marlboro Compact, which is priced at INR10 apiece.