British American Tobacco's exit from Russia to come under spotlight from investors

The business is set to update shareholders on Thursday June 9, months after the Kremlin launched an unprovoked invasion of Ukraine.

Having lingered for a while after the conflict started, BAT announced in March that it would withdraw from Russia.

The company makes Pall Mall cigarettes and had a market share of around 25% in Russia. It is looking for someone to sell its Russian business to, so any update will be of interest to shareholders. They will also be looking for any impacts that the company sees from the cost-of-living crisis. Although sales might not face much of a hit, the company will still be concerned about what it is paying to make its products. Raw material and labour costs have spiked in recent months. It could pass these extra costs on to consumers.

“Tobacco is a shrinking industry so the most important thing for British American Tobacco is that the group’s squeezing every last pound out of its dwindling customer base,” said Hargreaves Lansdown equity analyst Laura Hoy.

“This is nothing new for BAT’s investors, though inflation could exacerbate this. To that end margins will be the figure to watch as investors look for evidence of whether rising commodity costs are starting to eat into profits.

“Cigarette prices are mostly made up of taxes, though, so rising input costs may not make them all that more expensive for consumers.”

When they pick up the trading update on Thursday many investors will search for information on the New Categories business.

BAT has built its business on tobacco, but in recent years it has been pivoting towards different products. They include a line of vapes, Vuse, which by one measure is the largest in the world, under-lip nicotine pouches called Velo, and heated tobacco products Glo.

Last year these products generated more than £2 billion in revenue, and this is expected to have more than doubled in just a couple of years, according to BAT’s targets.