BTI Share Price JSE Rebounds Strongly Despite Illicit Trade and Falling Profits Lead to British American Tobacco South Africa Plant Closure
Despite significant operational changes and a steep decline in profitability, investors are cautiously coming to British American Tobacco
Quick overview
- British American Tobacco experienced a nearly 90% year-on-year profit decline in the third quarter, with revenue dropping by about half.
- New tobacco regulations and rising excise duties have further pressured margins, contributing to a significant operational retreat in Southern Africa.
- Despite initial sell-offs, BAT's stock has shown signs of stabilization, rebounding approximately 6% after finding support near its 50-week moving average.
- The company's future hinges on its ability to adapt to regulatory challenges and combat illicit trade while maintaining investor confidence.
British American Tobacco is navigating a sharp earnings downturn and major operational changes, yet investors are cautiously warming back to the stock as it rebounds from key technical support.
Profit Shock Dominates the Quarter
British American Tobacco’s third-quarter results underscored the depth of the challenges facing the global tobacco group. Profit collapsed nearly 90% year-on-year, with net income falling to RM7.02 million, while revenue dropped by roughly half to RM300.8 million. Cigarette volumes declined close to 50%, marking one of the weakest operating quarters in the company’s recent history.
Reflecting the earnings pressure, BAT sharply reduced its third interim dividend to 5 sen per share, down from 22 sen a year earlier. For the first nine months of the year, net profit slid 39% to RM81.24 million, while revenue fell 25% to RM1.25 billion. The numbers highlight a business grappling with both regulatory disruption and structural demand decline.
Regulation and Compliance Weigh on Margins
The earnings slump was exacerbated by new tobacco regulations, including the rollout of pictorial health warnings and a retail display ban. These changes required significant compliance spending, further compressing margins at a time when volumes were already under pressure.
BAT also flagged concerns around higher excise duties, warning that additional tax increases could further weaken legal cigarette sales. The combination of rising costs and falling demand continues to undermine profitability across several key markets.
Illicit Trade Forces Strategic Retreat in Southern Africa
Operationally, BAT has taken a decisive step by announcing plans to end manufacturing in South Africa. The company confirmed it will mothball its Heidelberg facility in Gauteng by the end of 2026, following the closure of its Mozambican operations scheduled for December.
Management attributed the decision primarily to the surge in illegal cigarettes, which BAT estimates now account for roughly 75% of the South African market. As a result, the Heidelberg plant has been operating at just 35% of capacity, making continued production economically unviable.
The formal consultation process with employees and unions began on 15 January under Section 189A of the Labour Relations Act, with discussions expected to conclude by the end of March 2026. Full closure of the facility is planned for the end of next year.
Market Reaction: From Sell-Off to Stabilization
The earnings disappointment and operational headlines initially weighed heavily on the stock. After rallying to a record high of around R1,045 in August 2025, BAT shares retreated sharply, falling more than 12% in September and extending losses into December.
However, recent price action suggests sentiment may be stabilizing. The stock found support near the 50-week moving average (yellow), a level that has historically attracted buyers. This week, shares rebounded roughly 6%, signaling renewed interest from investors willing to look past near-term weakness.
Technical Picture Improves, But Hurdles Remain
While the rebound is encouraging, BAT still faces technical resistance ahead. The stock is now approaching its 20-week moving average (gray), an area that previously capped upside moves. A sustained break above this level would likely restore confidence in the broader bullish trend.
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Failure to clear that resistance, however, could leave shares range-bound as investors wait for clearer evidence that earnings have stabilized and regulatory pressures are easing.
A Business in Transition
British American Tobacco is clearly at an inflection point. Declining combustible volumes, rising regulation, and rampant illicit trade are forcing difficult decisions, including factory closures and dividend reductions. Yet the recent share price rebound suggests the market may be starting to price in these realities.
Whether the recovery can extend will depend on BAT’s ability to defend margins, curb illicit market losses, and adapt its business model in an increasingly hostile regulatory environment. For now, investors appear cautiously optimistic—but far from convinced.
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