English
BATS trading update preview: can the tobacco giant navigate regulatory challenges?
British American Tobacco is set to release its half-year trading update on 3 June, with investors watching for progress on its smokeless transformation strategy amid legal and regulatory pressures.
BATS 2025 outlook amid challenging conditions
As British American Tobacco (BATS) approaches its 2025 half-year trading update on 3 June, investors are closely monitoring the company's performance amid a challenging global landscape.
BATS has projected approximately 1% revenue growth for 2025, with adjusted operating profit expected to rise between 1.5% and 2.5%. This conservative forecast reflects ongoing pressures, including increased excise duties in Bangladesh and stringent tobacco regulations in Australia.
The company anticipates a 2% decline in global tobacco industry volumes this year. Despite these challenges, BATS remains committed to its mid-term targets of 3–5% revenue growth and 4–6% adjusted operating profit growth by 2026.
These modest growth expectations reflect the reality facing traditional tobacco companies: declining consumption in developed markets, increasing regulatory pressures worldwide, and the need to balance investment in new product categories with maintaining profitability from conventional cigarettes.
Strategic focus on smokeless product transition
BATS continues to invest in its "New Categories" segment, encompassing products like Vuse (vaping), glo (heated tobacco), and Velo (nicotine pouches). The company aims to become predominantly smokeless by 2035, with these products contributing positively to its financials.
This transition represents perhaps the most significant strategic shift in BATS’ history, as the company attempts to pivot away from its traditional cigarette business towards reduced-risk products. The upcoming trading update will provide crucial insights into the progress of this transformation.
Vuse has become the world's leading vaping brand by retail market share, with particularly strong performance in the United States and several European markets. The brand's continued growth trajectory will be a key focus area for investors assessing BATS’ new category strategy.
The heated tobacco category, led by BATS’ glo brand, faces intense competition from Philip Morris International's IQOS product. Market share gains or losses in key markets like Japan will be closely scrutinised as indicators of BATS’ competitive positioning in this critical segment.
Financial strategy and shareholder returns
In a strategic move to enhance shareholder returns, BATS announced plans to sell a 2.3% stake in India's ITC, reducing its holding to 23.1%. Proceeds from this sale will bolster BATS’ 2025 share buyback program by £200.00 million, bringing the total to £1.1 billion.
This stake reduction in ITC represents a significant shift in BATS’ approach to its Indian operations. While ITC has been a valuable asset providing steady dividend income, the decision to reduce exposure suggests BATS is prioritising capital allocation toward growth areas and direct shareholder returns.
The expanded share buyback programme demonstrates management's confidence in the company's cash generation capabilities and commitment to returning capital to shareholders. With the share price under pressure from various regulatory and legal challenges, this buyback activity provides important price support.
BATS’ dividend policy remains central to its appeal for income-focused investors. The company has maintained its progressive dividend policy, and any commentary on future dividend growth will be closely watched by the substantial retail shareholder base attracted by BATS’ historically high yield, currently at 7.13% (as of 28 May 2025).
Legal challenges and Canadian litigation
BATS has set aside £6.2 billion in provisions related to a proposed C$32.5 billion settlement addressing litigation in Canada over health impacts of smoking. This significant charge contributed to a sharp decline in BATS’ share price earlier this year.
The Canadian litigation settlement represents one of the largest legal provisions in BATS’ history and highlights the ongoing legal risks facing tobacco companies globally. While this provision should provide certainty around Canadian exposure, investors remain concerned about potential similar actions in other jurisdictions.
The timing and structure of settlement payments will be important factors in determining the impact on BATS’ cash flow and financial flexibility. Management commentary on how these payments will be funded and their impact on capital allocation priorities will be closely scrutinised.
Beyond the Canadian case, tobacco companies face ongoing litigation risks worldwide. Any updates on other legal proceedings or changes to the regulatory landscape will be significant factors in assessing BATS’ long-term risk profile.
Regional performance and market dynamics
BATS’ global footprint provides both diversification benefits and exposure to varied regulatory environments. The upcoming trading update will likely provide insights into regional performance across key markets including the US, Europe, Asia-Pacific, and emerging markets.
The United States remains BATS’ largest and most profitable market, primarily through its Reynolds American subsidiary. Performance of both traditional cigarettes and new category products in this crucial market will be a primary focus for investors.
European markets face increasing regulatory pressure, with several countries implementing or considering flavour bans, plain packaging requirements, and tax increases. BATS’ ability to navigate these challenges while maintaining market share will be critical for overall performance.
Emerging markets, while offering growth potential, also present regulatory challenges. The mentioned excise duty increases in Bangladesh exemplify the type of sudden regulatory changes that can impact profitability in these markets, making guidance on emerging market performance particularly important.
Innovation and product development pipeline
Beyond the current new category portfolio, BATS continues to invest in research and development for next-generation products. The company's approach to innovation and product development will be increasingly important as traditional tobacco volumes decline.
Oral products, including both traditional snus and modern nicotine pouches, represent a significant growth opportunity. BATS’ Velo brand has gained traction in multiple markets, and updates on expansion plans and consumer adoption rates will be valuable indicators of future growth potential.
The regulatory pathway for new products remains complex, with different approaches across various jurisdictions. BATS’ ability to navigate regulatory approval processes for new products while maintaining compliance across existing categories represents a key operational challenge.
Investment levels in new category development must be balanced against the need to maintain profitability from traditional products that continue to generate the majority of cash flow. This balancing act will be reflected in both financial performance and strategic commentary during the trading update.
BATS analyst rating and technical analysis
According to LSEG Data & Analytics, 4 analysts have a ‘strong buy’ recommendation for BATS, 5 a ‘buy’, 4 a ‘hold’ and 1 a ‘sell’ with a long-term mean price target at 3,504.55p, 5% above the current share price (as of 28/05/2025).
BATS LSEG Data & Analytics chart
BATS has a TipRanks Smart Score of ‘5 Neutral’ but is rated as a ‘buy’ with 3 ’buy’ and 2 ‘hold’ recommendations (as of 28/05/2025).
BATS TipRanks Smart Score chart
The BATS share price, up 13% year-to-date and thus greatly outperforming the FTSE 100 index, has been gaining close to 50% from its 2,233p December 2023 low.
BATS vs FTSE 100 comparison chart
Since 2023 the BATS share price has been steadily rising with the February peak at 3,416p representing the next technical upside target.
Once bettered, the June 2022 high at 3,645p would be targeted longer term.
BATS monthly candlestick chart
The BATS share price is on track for its third consecutive monthly gain with it now trading above its 200-month simple moving average (SMA) at 3,147p.
A daily chart close above the 3,331p early May high is needed, for a technical break above this level to be validated, something the BATS share price has been trying but so far failing to do over the past couple of days.
BATS daily candlestick chart
While the mid-May low, long-term uptrend line, 200-day simple moving average (SMA) and early April low at 3,013p-to-2,916p hold on a daily chart closing basis, the medium-term uptrend is deemed to remain intact.
How to trade BATS shares around the update
For investors considering positions in BATS ahead of the trading update, several factors should inform your decision-making process.
- Research BATS’ transformation strategy, regulatory environment, and competitive positioning to understand the key drivers of performance.
- Consider your risk tolerance given the regulatory and legal challenges facing the tobacco industry.
- Open an account with IG by visiting our website and completing the application process.
- Search for 'British American Tobacco' or its ticker 'BATS' on our trading platform or app.
- Place your trade with appropriate risk management measures, considering the potential for significant price movements around earnings announcements.
Spread betting and CFD trading offer flexible ways to take positions on BATS, allowing you to profit from both rising and falling prices. These leveraged products can be particularly useful for trading around earnings announcements when volatility typically increases.
For longer-term investors attracted by BATS’ historically high dividend yield, share dealing provides a straightforward way to build a position in the company. However, it's important to understand the ongoing risks and regulatory challenges facing the tobacco industry.
BATS’ upcoming half-year trading update on 3 June 2025, followed by second quarter (Q2) earnings on 30 July, will provide crucial insights into the company's ability to manage its complex transition while maintaining financial performance. The company's focus on transitioning to smokeless products, strategic financial manoeuvres, and navigating regulatory challenges will be pivotal in shaping its performance in the latter half of 2025.
Investors should pay particular attention to new category performance, progress on cost reduction initiatives, and any updates on the timeline for achieving the company's ambitious smokeless transformation goals. With the tobacco industry facing unprecedented change, BATS’ ability to adapt while preserving shareholder value remains the central investment thesis for this dividend-focused stock.
Connect with us
Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 71% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work and whether you can afford to take the high risk of losing your money.
Professional clients trading spread bets and CFDs can lose more than they deposit.
Options and futures are complex instruments which come with a high risk of losing money rapidly due to leverage. They’re not suitable for most investors. Before you invest, you should consider whether you understand how options and futures work, the risks of trading these instruments and whether you can afford to lose more than your original investment.
Trading stocks and shares ‘on margin’ within a US options and futures account – meaning that you only finance part of the cost of acquiring a position in a security – carries additional risks over buying securities on a fully funded basis and may result in losses exceeding your original investment. Trading on margin will also result in additional costs to you as the investor and any securities purchased using margin may be held as collateral by the lender, restricting both your rights as shareholder, and your ability to use the securities until the margin trade is closed. You should familiarise yourself with these risks before trading on margin.
The value of shares, ETFs and other ETPs bought through a share dealing account, a US options and futures account, a stocks and shares ISA or a SIPP can fall as well as rise, which could mean getting back less than you originally put in. Past performance is no guarantee of future results. Some ETPs carry additional risks depending on how they’re structured, investors should ensure they familiarise themselves with the differences before investing.
Share dealing and IG Smart Portfolio accounts provided by IG Trading and Investments Ltd, CFD accounts and US options and futures accounts are provided by IG Markets Ltd, spread betting provided by IG Index Ltd.
IG is a trading name of IG Trading and Investments Ltd (a company registered in England and Wales under number 11628764), IG Markets Ltd (a company registered in England and Wales under number 04008957) and IG Index Ltd (a company registered in England and Wales under number 01190902). Registered address at Cannon Bridge House, 25 Dowgate Hill, London EC4R 2YA. IG Markets Ltd (Register number 195355), IG Trading and Investments Ltd (Register Number 944492) and IG Index Ltd (Register number 114059) are authorised and regulated by the Financial Conduct Authority.
The information on this site isn’t directed at residents of the United States, Belgium or any particular country outside the UK and isn’t intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.
