British American Tobacco (LSE:BATS) said it remains on course to deliver its full-year 2026 guidance, supported by strong performance across its U.S. business and continued growth in its New Category portfolio.
The company expects revenue from New Categories to increase by a mid-teens percentage rate this year, driven by rising demand for modern oral nicotine products and vapour offerings. Management highlighted continued momentum for the Velo and Vuse brands globally, while also pointing to plans for an innovation-led recovery in its glo heated tobacco business during the second half of the year.
Performance in the Americas and Europe remained resilient, helping offset a slower recovery in Asia-Pacific and Middle Eastern markets, where trading conditions continue to stabilise.
Growth Strategy Remains Intact Despite Market Headwinds
British American Tobacco reaffirmed its medium-term financial framework, although management indicated that 2026 results are likely to fall toward the lower end of its targeted ranges for revenue growth, profit expansion and earnings per share.
The company also warned that global cigarette volumes are expected to decline slightly faster than previously anticipated and noted that foreign exchange movements could create additional pressure on reported results.
Despite these challenges, management remains confident in the business outlook, supported by continued progress in reduced-risk products and a diversified geographic footprint.
Cash Generation and Shareholder Returns Remain Priorities
The group expects operating cash flow conversion to exceed 95% during the year and confirmed plans to complete a £1.3 billion share repurchase programme alongside its progressive dividend policy.
British American Tobacco also reiterated its objective of reducing leverage to between 2.0 and 2.5 times EBITDA by the end of 2026. The company believes these measures will support ongoing shareholder returns while maintaining financial flexibility in a competitive and evolving nicotine market.
Balanced Outlook Supported by Income Appeal
The company’s investment profile continues to benefit from solid profitability, although this is partially offset by leverage levels and a notable decline in cash flow recorded during 2025.
Valuation remains supported by a relatively moderate price-to-earnings multiple and an attractive dividend yield, while technical indicators present a broadly neutral picture. Management’s guidance and capital return commitments provide additional support, though investors continue to monitor competitive pressures in vapour products, illicit trade activity and softer performance in certain regions.
More About British American Tobacco
British American Tobacco is one of the world’s largest tobacco and nicotine companies, generating the majority of its revenue from traditional combustible cigarette products while expanding its presence in reduced-risk categories.
Its New Category portfolio includes Velo nicotine pouches, Vuse vapour products and glo heated tobacco devices. The company maintains a significant presence in the United States, Europe and a range of emerging markets as it seeks to accelerate the transition toward alternative nicotine products.
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