Where Will British American Tobacco Be in 1 Year?

Core Viewpoint - British American Tobacco offers a high dividend yield of 8.2%, but the company faces significant risks due to declining cigarette volumes and the need to adapt its business model [1][5]. Business Performance - Cigarette volumes have been consistently declining, with a 6.8% drop in the first half of 2024 compared to the same period in 2023, following a 5.3% decline in 2023 and a 5.1% decline in 2022 [3][4]. - The combustibles division, which includes cigarettes, constitutes approximately 80% of the company's revenues, with cigarettes making up nearly 98% of the volume within that division [6]. Future Outlook - By the end of 2024, British American Tobacco's brands will have an estimated 29 years of "value" left, decreasing to 28 years by the end of 2025, indicating a continuous decline in brand longevity [4]. - The company is attempting to diversify its business, with new ventures accounting for around 20% of total revenue, but these efforts are not yet sufficient to counterbalance the declines in the cigarette business [4]. Financial Implications - If the current decline continues, cigarette sales could drop from approximately 555 billion in 2023 to around 517 billion in 2024, and potentially to 482 billion in 2025, assuming the rate of decline remains constant [7]. - Price increases have temporarily offset volume declines, but there is a limit to how much prices can be raised before further exacerbating the volume drop [8].