British American Tobacco (NYSE:BTI) said its first-half 2026 results were in line with expectations on a constant-currency basis, supported by growth in U.S. nicotine products, continued momentum for its Velo modern oral brand and resilient combustibles performance in the U.S. and AME region.
The company reported 2.9% growth in group revenue, 3.8% growth in adjusted gross profit and 3.5% growth in adjusted profit from operations on a constant-currency basis. Adjusted diluted earnings per share increased 7.9% in the first half.
New Categories Gain Share and Profitability
Smokeless products represented 19.8% of group revenue, an increase of 160 basis points from the prior year. BAT added 4.1 million smokeless consumers over the past 12 months, bringing its total to 35 million.
New-category revenue rose 18%, led by a 66% increase in modern oral revenue. The company said Velo’s performance was strong across all three regions. Vapor revenue increased 5.3%, supported by a return to double-digit volume and revenue growth in the U.S., while heated-products revenue declined nearly 12% as inventory movements and competition in value segments weighed on glo.
New-category gross profit increased by more than £120 million, while category contribution rose 55% to £269 million. Iqbal said the improvement reflected more disciplined investment and growing scale benefits.
Tadeu said BAT is concentrating investments in categories and markets with the strongest potential returns. The company has exited or reduced its presence in certain vapor markets where it believes regulation or enforcement does not provide a level playing field for legal manufacturers.
- BAT shipped 7.9 billion modern oral pouches in the first half.
- Modern oral volume share across its top markets increased by more than eight percentage points to 39%.
- BAT said Velo holds a 62% volume share in its top APMEA modern oral markets and a 68.5% value share.
U.S. Delivers Strong First-Half Growth
U.S. revenue increased 8.5%, while adjusted operating profit rose 10.1%. New-category revenue grew nearly 60%, driven by Velo Plus, whose revenue increased more than 200%, and by Vuse’s return to double-digit volume and revenue growth.
U.S. combustibles revenue rose 5%, aided by price mix, excise-duty drawback and positive trade inventory movements. However, BAT said volume share declined 80 basis points and value share declined 40 basis points amid continued growth in deep-discount cigarettes and heightened competition.
Tadeu said the company had held its U.S. combustible volume share since January after investing behind its portfolio and commercial execution. He noted that approximately 2 percentage points of the 5% U.S. combustible revenue increase came from trade inventory movements that are expected to unwind in the second half.
BAT plans to increase investment in the U.S. during the second half, including the launch of Velo Max and a phased rollout of adult-focused Vuse flavors. Vuse flavors are scheduled to begin rolling out in the third quarter to about 25,000 outlets, followed by another 25,000 outlets in the fourth quarter, subject to retailer commitments around adult-only sales and identification checks.
Velo Max, a higher-moisture product, is expected to launch in the third quarter with two additional strengths and four new flavors. Tadeu said the product would complement the existing Velo Plus range, but BAT did not provide pricing details.
The company also pointed to enforcement actions against unauthorized vapor products in the U.S. Tadeu said more than 18 million unauthorized vapor products had been seized through federal collaboration, while about half of industry vapor volume is now covered by state directory and enforcement frameworks. BAT said these actions helped support a return to growth in the legal vapor market during the first half.
Regional Performance Mixed
In AME, total revenue grew 0.9%, with combustible revenue up 2.55% and new-category revenue up 1.9%. Strong combustible delivery in Brazil, Turkey and Mexico was partly offset by BAT’s exit from Cuba, competitive pressure in Germany and Romania, and lower direct leaf sales. The company expects AME performance to accelerate in the second half as targeted commercial actions and product launches contribute.
APMEA revenue declined 6.3%, primarily because of combustibles. Growth in Pakistan and Indonesia was more than offset by regulatory pressures and illicit trade in Bangladesh and Australia, as well as the timing of inventory movements in Vietnam. Adjusted profit in the region fell 16.5%.
BAT expects a sequential recovery in APMEA during the second half, helped by commercial investments, a softer comparison in Australia and the planned third-quarter Japanese launch of Hyper Pro+. The company said modern oral revenue in APMEA increased 43%, while vapor revenue declined 28% due to strategic market exits and selective resource allocation.
Cost Savings, Cash Flow and Outlook
Group operating margin increased 30 basis points to 43.7% on a constant-currency basis. BAT expanded its Fit2Win transformation program, identifying a further £100 million of optimization savings. The company now expects annualized Fit2Win savings of £700 million by 2028, including £500 million by 2027.
Total one-off costs associated with the program are now expected to reach £950 million, of which £840 million will be treated as adjusting items. BAT expects most costs to be incurred in 2026, with the remaining balance in 2027.
The company reaffirmed its expectation to reach its target leverage range of two to 2.5 times by year-end and said it remains on track to generate more than £50 billion in free cash flow by 2030. BAT also plans to continue its progressive dividend and its £1.3 billion 2026 share repurchase program.
For the full year, BAT expects revenue and adjusted operating profit growth at the lower end of its target range, reflecting around a 1% transactional foreign-exchange headwind and increased investment in U.S. products, heated-product launches and combustibles. Iqbal said full-year EPS growth is now expected toward the middle of BAT’s 5% to 8% range, aided by lower finance costs and strong cash conversion.
About British American Tobacco (NYSE:BTI)
British American Tobacco plc (BTI) is a multinational tobacco manufacturer and nicotine products company headquartered in London. Founded in 1902 as a joint venture to commercialize tobacco products outside the United States, the company has grown into one of the world’s largest tobacco firms with a long history in manufacturing and global distribution of combustible tobacco products.
BAT’s core business remains the manufacture and sale of cigarettes and other tobacco products under a portfolio of well-known consumer brands, including Dunhill, Lucky Strike, Pall Mall, Kent and Rothmans.
