According to a report by Reuters, British American Tobacco (BAT) has incurred a loss of $31.5 billion while impairing its brands in the United States. The company states that the traditional cigarette market lacks long-term prospects.
According to a recent report by Reuters, one of the world’s major tobacco companies is cutting the value of its traditional cigarettes in an important market for the first time. The report also emphasizes the industry’s need to focus on alternative products. This substantial decrease in value is due to regulations surrounding cigarettes and the growing awareness of health risks, including the proposed ban on menthol cigarettes.
Due to various challenges that the United States is facing, such as consumers shifting towards cheaper brands to cope with inflation and the rise of illegal disposable e-cigarettes, the company has made the decision to take this step. According to Reuters, BAT stated that these factors, coupled with the overall trend of moving away from smoking, mean that “it will adjust the way it handles the value of its American brands on its balance sheet, converting their worth into a limited lifespan of 30 years.
The valuation impact has been observed on Newport, Camel, Pall Mall, and Natural American Spirit brands, said a spokesperson.
Tadeu Marroco, the CEO of British American Tobacco, referred to this move as “aligning accounting with reality.” He further stated that while he does not believe cigarettes will vanish within 30 years, the cost is no longer justifiable.
According to Reuters, BAT has stated that revenue growth for the year may fall towards the lower end of its 3-5% range. It also expects that revenue and adjusted operating profit will achieve low single-digit growth by 2024.
The company also mentioned that they plan to start amortizing the remaining value of their combustible brands in the US from 2024. They have also announced a new target, aiming for non-combustible products to account for 50% of their total revenue by 2035.