British American Tobacco (BATS.L) is giving ordinary cigarettes a relatively lengthy lifespan. On Wednesday, the $65 billion maker of Camel and Lucky Strike took a 25 billion pound writedown on its U.S. cigarette brands and estimated that their economic life would end in around 30 years. The impairment is part of CEO Tadeu Marroco’s plan to build a “smokeless world” and to generate 50% of the company’s revenue from non-traditional cigarettes by 2035.
Marroco’s vision is also key to reinvigorating the company’s depressed valuation. The London-listed company currently trades on just 6.4 times its expected earnings in 2023, LSEG forecasts show, far below the over 14 times commanded by Philip Morris International (PM.N). BAT’s lack of ambition in phasing out so-called combustible cigarettes helps explain that gap. PMI says that non-traditional cigarettes will account for over 50% of revenues by 2025. To close the valuation gap, Marroco needs to implement a more aggressive smokeless plan. (By Aimee Donnellan).
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