On Thursday, British American Tobacco announced a £6.2 billion ($7.74 billion) impact from a Canadian lawsuit and predicted that tax changes in Bangladesh and Australia would diminish its performance in 2025, causing a more than 9% decline in its shares.
The company, known for brands like Lucky Strike and Dunhill, along with other firms, was expected to settle a prolonged legal dispute in Canada, but this was contested by some, including Philip Morris International's Canadian arm.
Due to tax hikes in Australia and Bangladesh, BAT anticipated setbacks in its tobacco business.
CEO Tadeu Marroco labeled these challenges as "significant regulatory and fiscal headwinds" affecting the current year's performance, with a forecasted relief in 2026 as investments yield growth.
Marroco expressed hope that the new U.S. administration could address the sales of illicit disposable vapes, which have impacted cigarette and vape sales in the U.S.
For 2025, BAT projects a modest 1% revenue growth.
Following the news, BAT's shares plummeted over 9%, causing a $6 billion decrease in market capitalization, its worst performance since 2020.
Analyst Rae Maile from Panmure Liberum attributed the share drop to the potential impact of the Canadian settlement on BAT's future earnings.
The proposed settlement involves an initial payment followed by annual installments, initially set at 85% of post-tax net income, excluding revenue from alternative products like vapes, gradually decreasing over time.
BAT disclosed projections estimating charges equivalent to 100% of Canadian profits, excluding alternative products, for 2025.
Upon restating its 2024 results, the earnings per share would have been lowered to 341.1 pence as opposed to the reported 362.5 pence.
Despite concerns over the Canadian settlement, Chris Beckett, head of equity research at BAT investor Quilter Cheviot, emphasized that the weak 2025 guidance overshadowed this issue, noting that the stock remained a good investment with robust long-term cash returns.