BAT(US:BTI)2026-02-12 10:32Financial Data and Key Metrics Changes - Group revenue increased by 2.1%, adjusted profit rose by 3.4%, adjusted profit from operations grew by 2.3%, and adjusted diluted EPS was up by 3.4% [8][17] - The company delivered results at the top end of guidance, supported by accelerated momentum through the second half of the year [8][18] - Adjusted profit was impacted by nearly GBP 1.6 billion in amortization related to U.S.-acquired trademarks and a net credit of GBP 524 million from the Canadian combustible industry outlook [6][7] Business Line Data and Key Metrics Changes - New categories revenue grew by 7%, driven by Modern Oral, which was up by 48%, while Heated Products increased by 1% [8][10] - Vapor revenue declined by nearly 9%, primarily due to illicit pressures in the U.S. and Canada [8][10] - Combustible revenue grew by 1%, with volume decline offset by robust price mix across markets [9][10] Market Data and Key Metrics Changes - In the U.S., combustibles revenue increased by 4.6%, with a value share increase of 30 basis points [10][11] - New category revenue in the U.S. grew nearly 20%, driven by VELO+, which delivered over 300% growth [10][11] - In AME, revenue grew over 3%, with combustibles up more than 2%, supported by strong delivery in Brazil, Turkey, and Mexico [11][12] Company Strategy and Development Direction - The company aims to become a predominantly smokeless business by 2035, focusing on premium innovation and quality growth [20][21] - The Fit to Win program is expected to deliver GBP 600 million of annualized incremental savings by 2028, with GBP 500 million expected by 2027 [15][16] - The company is committed to reinvesting savings to support further sustainable growth initiatives [15][18] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in returning to the Midterm Algorithm in 2026, with expectations of 3%-5% revenue growth and 4%-6% adjusted profit from operations growth [18][19] - The company anticipates stabilization in performance in APMEA and continued investment in premium innovations [19][54] - Management highlighted the importance of regulatory improvements and enforcement in the vapor category, which is expected to support future growth [31][32] Other Important Information - The company announced a 2% increase in its dividend and a share buyback increase to GBP 1.3 billion for 2026 [17][18] - The operating margin remained broadly flat at 44%, successfully offsetting inflationary and FX pressures [14][15] - The company has a strong cash generation capability, aiming to deliver more than GBP 50 billion in free cash flow by 2030 [33][34] Q&A Session Summary Question: Expectations for Modern Oral performance in the U.S. for fiscal 2026 - Management believes that the strong retention rate of 70% for VELO+ indicates competitive potential for continued growth in the U.S. market [39][40] Question: Factors that could improve performance in 2026 - Management highlighted the expectation of less drag from Australia and continued investment in premium innovations as key factors for improved performance [45][52] Question: Which category offers the most growth potential - Management expressed that Modern Oral is the most exciting category due to its rapid growth and potential in emerging markets [58][59] Question: Concerns regarding the Australian market - Management acknowledged the challenges in Australia due to increasing illicit market share but noted that the drag will lessen over time [63][64]