“I remain committed to delivering sustainable value for our shareholders through strong cash returns, including our progressive dividend and a sustainable share buy-back programme.” - Tadeu Marroco, BAT CEO, H1’25 Pre-Close remarks
I held a preference to wait for the full H1’25 results before writing about British American Tobacco once again. Surely, there will be much more to say then. Yet, I find myself compelled to offer some mixed thoughts. Within the H1’25 Pre-Close, there are several points to highlight. Opportunities and hindrances to vapor and HNB across geography are plentiful. Some markets still appear as coin flips when assessing how specific categories will play out. Velo, globally, is on the right track, with the U.S. showing promise, as anticipated, courtesy of Velo Plus. More importantly, despite the lofty pressures facing U.S. combustibles, the group’s portfolio is poised to weather the storm—the looming menthol ban, which has been paused indefinitely, is now widely treated as ancient history. But far more interesting and worthy of focus is the May 2025 announcement in which BAT declared it would sell an additional block of its ITC stake, swiftly followed by its completion. In January of this year, I wrote on the industry in The Nicotine Basket, stating:
The list of questions goes on and on. Drill down, and there is endless nuance. Category mixes, brand portfolios, geographies, currencies, margins, leverage, multiples, growth rates, strategy, communication, management, and culture come into play. One of the greatest threats to the industry is capital allocation—stemming from the immense profitability of the core business. Even while distributing a good deal to shareholders, there has been no shortage of instances in which cash piles up and management teams have taken large sums and malinvested—sometimes tacking on extra debt simultaneously. All it takes for any one name to become the laggard is to dream up a giant, half-baked idea and charge headfirst. Likewise, many of these companies hold strategic assets that can produce windfalls or be squandered.
I have witnessed considerable fanfare celebrating BAT’s recent sale, while others have criticized the action. Indeed, there is plenty of speculation to have—and I will present some of my own. However, there is also straightforward reasoning that supports what the recent sale signifies for the group’s longer-term ambitions.
