Top line
Shares of British American Tobacco fell to their lowest level in more than a decade on Wednesday after cigarette maker Newport and Camel said it was significantly writing down the value of its U.S. operations, as British American Tobacco and its publicly traded peers continue to significantly underperform compared to last year. wider market amid a decline in the popularity of traditional cigarettes.
British American Tobacco shares reached their lowest level in 12 years on Wednesday.
Highlights
Shares of London-listed British American Tobacco fell 8% to $29, or £22.92, closing at their lowest price in sterling terms since January 11, according to FactSet data.
Wednesday’s decline, which widened British American Tobacco’s stock loss to 28% since the start of the year, came after British American Tobacco’s decline. announcement It’s taking a $31.5 billion impairment charge primarily on its U.S. cigarette business, citing growing popularity of vaping and macroeconomic headwinds.
Although the write-down is little more than a basic accounting update and has no material impact on British American Tobacco’s future cash generation, it is a “significant figure illustrating the perils of this industry and sending less than confident signals about the prospects of the cigarette sector. according to to RBC Capital Markets analysts.
Large number
-2%. That’s how British American Tobacco shares have returned over the past decade, including dividends, well below the S&P 500’s 205% return.
Surprising fact
Philip Morris International and Altria Group, the only U.S.-based tobacco companies with a market capitalization greater than that of British American Tobacco, have also struggled in the market. Philip Morris’s year-to-date and 10-year returns are -5% and 77%, respectively, while Altria’s are -2% and 101%.
Key context
Tobacco stock’s weak returns come as the industry grapples with a growing popularity of non-combustible nicotine products and increased regulatory scrutiny in the United States. linked to the serious harmful effects of smoking on health. British American Tobacco’s Newport and Camel cigarettes captured a combined 22% market share in the United States in 2017, according to according to government data, behind Altria’s Marlboro brand in popularity. British American Tobacco bought Reynolds American in 2017 for $49 billion, and its markdown announcement Wednesday likely refers to the acquisition’s low ROI.
