British American Tobacco Earnings Show New Category Growth and Strong U.S. Performance, as BTI Share Price JSE Stays Bullish

British American Tobacco delivered first-half results broadly in line with expectations, with rapid growth in smokeless products and stronger U.S. performance supporting earnings, yet the JSE-listed BTI share price fell 3.54% as investors remained cautious about the broader growth outlook.

Smokeless Products Continue to Expand

BAT’s New Categories portfolio remained the strongest part of the business.

Revenue from New Categories increased 18.0% at constant exchange rates, supported by strong growth in Modern Oral products and a return to double-digit growth in U.S. Vapour.

Smokeless products now represent 19.8% of total group revenue, increasing by 1.6 percentage points from the end of 2025. The company also reported that its global smokeless consumer base reached approximately 35 million.

Modern Oral was particularly strong, with revenue rising 65.9% and the category becoming BAT’s largest New Category by revenue. The company also strengthened its position in its key markets, achieving a 39.2% volume share.

BTI Shares Fall Despite Strong New Category Growth but Trend Remains Bullish

British American Tobacco (LSE:BATS) reported a broadly solid first half of 2026, with its transformation toward smokeless products continuing to gather momentum. However, investors responded cautiously, sending the JSE-listed BTI share price 3.54% lower for the session.

The decline suggests the market may have been looking for stronger evidence that BAT’s shift away from traditional tobacco products can generate sustained growth across all regions.

U.S. Performance Provides Important Support

The United States remained a major contributor to BAT’s first-half performance.

New Categories revenue in the U.S. increased 58.1%, helping overall U.S. revenue rise 8.5%.

BAT expects further support from the planned rollout of Velo Max in Modern Oral and selected adult-focused Vuse flavours in Vapour during the second half of 2026.

The company also continued to generate growth from its traditional combustible portfolio, with revenue increasing 2.1% at constant exchange rates, primarily due to pricing and product mix.

Earnings Improve Despite Regional Weakness

Group revenue increased 1.4%, or 2.9% at constant exchange rates.

The U.S. and Americas, Middle East and Europe regions provided much of the support, while the Asia-Pacific, Middle East and Africa region remained weaker, with revenue declining 6.3%.

Adjusted operating profit increased 3.5%, while adjusted operating margin improved by 30 basis points to 43.7%.

Adjusted diluted earnings per share rose 7.9%, although reported diluted EPS declined 28.6% to 145.3 pence.

The difference was largely related to the impact of the Canadian legal settlement and associated accounting effects from the prior period, rather than a deterioration in underlying trading performance.

Buyback and Debt Reduction Remain in Focus

BAT continues to prioritize cash generation and capital allocation while reducing leverage.

The company remains on track to complete its £1.3 billion share buyback programme during 2026 and reaffirmed its commitment to dividend growth in sterling terms.

Management also highlighted continued progress in debt reduction and strong cash conversion, providing some support for shareholder returns despite the challenging industry backdrop.

Full-Year Outlook Remains Cautious

BAT reaffirmed its full-year 2026 guidance but now expects adjusted diluted EPS growth to land toward the middle of its 5% to 8% guidance range.

Management remains confident that the transformation is progressing, particularly as New Categories become a larger part of the business.

However, the weaker APMEA performance and the continued dependence on successful growth in smokeless products remain important risks.

Outlook

BAT’s first-half results show meaningful progress in its transition toward smokeless products, with New Categories revenue accelerating 18% and U.S. performance remaining particularly strong.

Nevertheless, the 3.54% decline in BTI shares indicates that investors remain cautious. The company must demonstrate that rapid Modern Oral and Vapour growth can offset slower regional markets while maintaining margins, cash generation and shareholder returns.

For now, BAT’s transformation is moving in the right direction, but the share-price reaction suggests investors want to see stronger and more consistent evidence that the new growth strategy can deliver sustainable long-term returns.

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Skerdian Meta

Lead Analyst

Skerdian Meta Lead Analyst. Skerdian is a professional Forex trader and a market analyst. He has been actively engaged in market analysis for the past 11 years. Before becoming our head analyst, Skerdian served as a trader and market analyst in Saxo Bank's local branch, Aksioner. Skerdian specialized in experimenting with developing models and hands-on trading. Skerdian has a masters degree in finance and investment.

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