(Reuters) -British American Tobacco exceeded first-half profit estimates on Thursday as its U.S. business grew for the first time in three years, a potential turnaround in its largest market as new tariffs are introduced and consumer preferences shift.
BATS said it expects annual revenue growth to come in at the top end of its forecast range.
The maker of Lucky Strike and Dunhill cigarettes said revenue in the U.S., which makes up about 44% of total sales, grew 3.7% at constant currency, with Velo, its nicotine pouches, helping sales of its new category products grow 3.9%.
Its smokeless products, which include Velo, Vuse Ultra premium vapour, and glo Hilo heated tobacco, make up more than 18% of total revenue.
BAT and peers such as Philip Morris, Imperial Brands, and Altria are trying to capture a bigger share of the vapes, tobacco heating product and oral nicotine pouches market as sales drop in traditional tobacco products.
While most of BAT’s products sold in the U.S. are produced locally, its Vuse vape devices are made in Indonesia, now subject to a 19% tariff.
CEO Tadeu Marroco said at a news briefing that BAT had front-loaded some stock to mitigate this in the short-term, but would look to absorb most of the tariff via its profit margin, adding that U.S.-produced liquids were a bigger part of its business.
BAT would also be exposed to higher costs via items such as packaging material, he said, though the impact of this was “manageable” and the company was watching how consumers would be affected by widespread tariff changes for the rest of the year.
It reported adjusted diluted earnings of 162 pence per share for the six months to June 30, compared with 159.4 pence a year ago, and a company-compiled consensus estimate of 154.8 pence.
The company said it was on track to achieve its 2025 financial forecast, with annual sales growth likely at the upper end of its 1%-2% forecast range.
(Reporting by Emma Rumney in London and Shashwat Awasthi in Bengaluru; Editing by Mrigank Dhaniwala andd Bernadette Baum)
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