British American Tobacco p.l.c.

Reported on a constant currency adjusted basis, group revenue increased 2.9%, adjusted gross profit rose 3.8%, adjusted profit from operations grew 3.5%, and adjusted diluted EPS increased 7.9%. New categories delivered 18% revenue growth, with Modern Oral up 66% and Vapour up 5.3%, while heated products revenue fell nearly 12%; category contribution reached GBP 269 million, up 55%. Combustibles revenue rose 2.1% with price/mix up 6.8%, while combustible volumes fell 4.7%. Group operating margin was 43.7%, up 30 bps. Adjusting items included approximately GBP 800 million primarily from U.S. trademark amortization, a GBP 370 million Fit2Win-related one-off, and a GBP 149 million credit from historical litigation settlement. For the full year, management expects net finance cost of around GBP 1.65 billion, an underlying tax rate of 24% to 25%, revenue and operating profit at the lower end of the previously guided range, and EPS growth towards the middle of the 5% to 8% range. The company also said it expects to be within its 2 to 2.5x leverage corridor by year-end.

Tadeu Marroco framed the quarter as evidence that BAT’s transformation is gaining momentum, especially in smokeless and in the U.S. multi-category portfolio. He emphasized that BAT is now the fastest-growing company in total nicotine, with Velo and Vuse strengthening leadership positions, and said the business is returning to its algorithm after a period of investment and transition. His tone was confident but disciplined, stressing that the company is investing where returns are strongest and focusing on long-term sustainable growth rather than maximizing short-term results.

Javed Iqbal highlighted that H1 results were in line with expectations on a constant currency basis, with stronger performance from the U.S. and new categories. He called out the main adjusting items: about GBP 800 million from U.S. trademark amortization, GBP 370 million of Fit2Win-related adjustments, and a GBP 149 million litigation credit, and said the group posted a 43.7% operating margin, up 30 bps. He also guided to net finance cost of around GBP 1.65 billion, a 24% to 25% tax rate, leverage within 2 to 2.5x by year-end, and full-year EPS growth in the middle of the 5% to 8% range, supported by strong cash conversion above 95% for the full year.

Analysts focused on the sustainability of U.S. Vapor enforcement tailwinds, the rollout pace and economics of Velo Max, U.S. combustibles outperformance versus the algorithm, and whether European vape weakness and market exits were complete. Management said enforcement is helping the legal Vapor market, but the bigger change should come from more level playing field and FDA prioritization guidance; Vuse flavor rollout will start in Q3 in about 25,000 outlets and then expand in Q4. On U.S. combustibles, BAT said H1 benefited from trade movements and that second-half performance should moderate closer to the algorithm as it increases investment and lapping gets tougher; on market exits in Vapor, management said most actions are already taken but some H2 impact may still remain.