BAT’s Vuse and Velo Upgrades Fail to Calm Investors as Cigarette Decline Worsens
03.06.2026 - 17:36:54 | boerse-global.de
British American Tobacco raised its growth forecast for smokeless products on Tuesday, but the market focused instead on a steeper-than-expected slide in traditional cigarette volumes. Shares in the London-listed tobacco giant fell as much as 4% intraday before closing 2.5% lower at 4,450 pence — equivalent to around €51.02.
The producer of Dunhill and Lucky Strike now expects global cigarette volumes to shrink by 2.5% in 2026, a harsher outlook than the previously assumed 2.0% decline. The deterioration is most pronounced in Asia-Pacific and the Middle East, where competitive pressure is intensifying. In the US, an illegal vape market estimated at ÂŁ7 billion is also eating into legal sales.
Smokeless segment shows faster growth
Despite the headwinds, BAT lifted its growth targets for the “New Categories” division — encompassing its Vuse vaping brand, Velo nicotine pouches, and heated tobacco. The company now forecasts mid-teens percentage growth for both the first half and the full year, up from an earlier projection of low double-digit expansion. The division contributed roughly £3.6 billion to group revenue in 2025, about 18% of the total.
CEO Tadeu Marroco highlighted “excellent” revenue and contribution margin gains from Vuse and Velo worldwide, with the US vapor and modern oral businesses both performing robustly. However, the classic cigarette unit still accounts for £20.2 billion in revenue and remains the dominant profit engine — and its decline is accelerating.
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Guidance squeezed to the lower end
The combination of a faster cigarette volume drop and a still-modest smokeless base means BAT’s 2026 revenue will likely land at the low end of the 3% to 5% growth range. Adjusted organic operating profit is expected to hit the bottom of the 4% to 6% corridor. Management said profit contributions will be weighted more heavily toward the second half of the year, when savings from the “Fit2Win” cost-efficiency programme are expected to flow through.
On the capital side, BAT is pressing ahead with a £1.3 billion share buyback programme and a progressive dividend policy. Net leverage is targeted to fall to the 2.0x–2.5x band by year-end. A change in the finance department is also on the horizon: Dragos Constantinescu will take over as CFO on 1 September, replacing interim CFO Javed Iqbal.
Analysts divided on valuation
The contrasting forces at play are reflected in a wide range of analyst price targets. Bank of America rates the stock a “Buy” with a target of 50.45 GBP, while Jefferies also calls it a “Buy” at 52.00 GBP. On the bearish side, RBC Capital has a “Sell” rating and a target of 36.00 GBP — roughly 20% below the current share price.
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Following Tuesday’s decline, the stock now trades 11% below its 52-week high of €57.50, which was set as recently as mid-May. Even so, the shares are up nearly 26% year to date. With a dividend yield of 5.38% and a price-to-earnings ratio of around 13, some investors see valuation support. But whether the faster growth at Vuse and Velo can eventually offset the structural erosion of the cigarette franchise remains the central question — one that the half-year results will begin to answer.
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