British American Tobacco H1 2025 Earnings Report

British American Tobacco EPS Results

• Actual EPS: N/A
• Consensus EPS: $2.19
• Beat/Miss: N/A
• One Year Ago EPS: N/A

British American Tobacco Revenue Results

• Actual Revenue: N/A
• Expected Revenue: $16.22 billion
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

British American Tobacco Announcement Details

• Quarter: H1 2025
• Date: 7/31/2025
• Time: Before Market Opens
• Conference Call Date: Thursday, July 31, 2025
• Conference Call Time: 4:30AM ET

British American Tobacco (NYSE:BTI) engages in the provision of tobacco and nicotine products to consumers worldwide. It also offers vapour, heated, and modern oral nicotine products; combustible cigarettes; and traditional oral products, such as snus and moist snuff. The company offers its products under the Vuse, glo, Velo, Grizzly, Kodiak, Dunhill, Kent, Lucky Strike, Pall Mall, Rothmans, Camel, Natural American Spirit, Newport, Vogue, Viceroy, Kool, Peter Stuyvesant, Craven A, State Express 555 and Shuang Xi brands. It also distributes its products to retail outlets. British American Tobacco p.l.c. was founded in 1902 and is based in London, the United Kingdom.

British American Tobacco H1 2025 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: H1 results came in slightly ahead of expectations with Group revenue up 1.8%, adjusted profit from operations up 1.9%, and full-year revenue guidance raised to the top end of the 1–2% range while APFO guidance is maintained.
• Positive Sentiment: New categories now contribute 18.2% of revenue, with modern oral growing over 40% globally, 63% volume share in AME and new category contribution margin rising 280 basis points to 10.6%.
• Positive Sentiment: The U.S. market returned to both combustible and overall revenue growth, with combustible revenue up 3.8%, overall U.S. revenue up 3.7%, volume share increases, and adjusted profit rising 3.2%.
• Positive Sentiment: Strong cash generation underpins enhanced financial flexibility, with a progressive dividend, a 2025 share buyback increased to £1.1 billion, and a commitment to deliver over £50 billion free cash flow by 2030.
• Negative Sentiment: Illicit trade and regulatory restrictions, particularly in Canada’s flavor-ban market and the U.S. vapor sector, drove a 13% decline in vapor revenue, highlighting enforcement challenges.

Presentation

[Tadeu Marroco, CEO & Member of Management Board at British American Tobacco]

Good morning everyone. I am delighted to welcome you to our twenty twenty five Interim Results Presentation. With me this morning is Soraya Bencik, CFO and Victoria Buxton, Group Head of Investor Relations. I will begin with our transformation highlights and the progress we have made against our 2025 priorities. Soraya will then take you through our financial results in more detail, before I return to talk more about our performance outlook and why we are confident in the pathway ahead.

[Tadeu Marroco, CEO & Member of Management Board at British American Tobacco]

We will then take your questions. With that, I would like to draw your attention to the disclaimers on Slides two and three. Let's begin by looking at the positive transformation momentum we are driving. Starting with some highlights. We have delivered group results slightly ahead of expectations, which Soraya will talk about in more detail.

[Tadeu Marroco, CEO & Member of Management Board at British American Tobacco]

Smokeless now accounts for 18.2% of Group revenue, up 70 basis points versus last year. And we added 1,400,000 smokeless consumers, reaching 30,500,000, mainly driven by our continued success in modern auto. Our focus on quality growth, balancing top and bottom line delivery has driven a further improvement in new category contribution margin up two eighty basis points to 10.6% at constant rates. We continue to enhance our financial flexibility, enabling us to make progress on the leverage and reward shareholders with strong cash returns. Alongside our progressive dividend, we recently increased our twenty twenty five share buyback by GBP 200,000,000 to GBP 1,100,000,000.0.

[Tadeu Marroco, CEO & Member of Management Board at British American Tobacco]

I'm proud that we have delivered what we said we would in the first half against our 2025 priorities as we continue to build a track record of delivery. Our quality growth focus is central to our new categories execution to ensure we roll out new innovations in a target way while continue to improve our contribution margin. Driving value from our combustibles business is essential to funding our transformation and The U. S. Is a key driver of this.

[Tadeu Marroco, CEO & Member of Management Board at British American Tobacco]

I'm delighted with our return to both revenue and profit growth in The U. S. For the first time since 2022, driven by combustibles and modern oral. We remain focused on our proactive approach to regulatory affairs and continue to advocate for science led level playing fields with robust enforcement for smokeless alternatives. In the first half, we activated OMINI in 13 markets globally, with further launches planned for the second half of the year.

[Tadeu Marroco, CEO & Member of Management Board at British American Tobacco]

Importantly, all of this is executed with a strong focus on cash generation, enabling us to continue to deleverage and reward shareholders with strong cash returns. I'm pleased to report a notable increase in energy and momentum across the group. And I would like to thank all our teams around the world who are driving these encouraging results. And with that, I will hand over to Soraya to take you through our H1 performance in more detail.

[Soraya Benchikh, CFO, Member of Management Board & Executive Director at British American Tobacco]

Thank you, Tadeo. And good morning, everyone. I'm pleased to share that our results on a constant currency basis came in slightly ahead of expectations. Our reported numbers include some adjusting items such as a GBP $575,000,000 reduction in our Canadian provision following an update of the forecasted market performance and the 900,000,000 gain from the partial sale of our ITC investment. To give you a clear picture of our underlying performance, I'll focus on constant currency adjusted metrics and you can find more detail on the adjusting items appendix.

[Soraya Benchikh, CFO, Member of Management Board & Executive Director at British American Tobacco]

In H1, we delivered a strong performance ahead of our original guidance at the upper end of our 1% to 2% revenue growth range. Group revenue was up 1.8%, adjusted gross profit rose by 3% and adjusted profit from operations grew 1.9%, with adjusted diluted EPS increasing by 1.7. With a stronger than expected H1, we now anticipate full year revenue at the top end of our 1% to 2% guidance. We maintain our APFO guidance of 1.5% to 2.5%, reflecting increased investment in new categories and the stronger U. S.

[Soraya Benchikh, CFO, Member of Management Board & Executive Director at British American Tobacco]

Combustibles competitor in H2. Let's now turn to new categories. Revenue was up 2.4%, driven by an outstanding growth in modern oral, which was up over 40% and heated products, which rose by more than 3%. This was partly offset by a 13 decline in vapor mainly due to illicit trade in The U. S.

[Soraya Benchikh, CFO, Member of Management Board & Executive Director at British American Tobacco]

And Canada. We are delivering quality growth with gross margin up two fifty basis points and contribution margin up two eighty basis points reaching 10.6%. This reflects our targeted investments in high value markets, a disciplined approach to ROI and the benefits of scale. And I'm really proud of the progress we've made and we expect momentum to build in H2 with new category revenue growth moving into the mid single digits for the full year. Modern oral in AME is a fantastic example of quality growth in action.

[Soraya Benchikh, CFO, Member of Management Board & Executive Director at British American Tobacco]

We are clear category leaders in the region with 63% volume share in top markets. And over the last four years, consumer numbers, volume and revenue have more than tripled, making modern oral our largest new category in the region by both revenue and contribution with a gross margin already 10 percentage points above combustibles together with the fastest payback period of just over one year. Looking forward, I am confident that Modern Oral will continue to be a key driver of our sustainable growth and profitability both in AME and globally. Now turning to combustibles. Revenue increased 0.8% with volume decline more than offset by strong pricing across the globe, driving a healthy price mix uplift.

[Soraya Benchikh, CFO, Member of Management Board & Executive Director at British American Tobacco]

We delivered quality growth here too. Gross profit increased by 2.4% and contribution rose 2.2%, helped by a strong performance in The U. S, favorable price mix and ongoing productivity and simplification gains. I'm especially pleased to see our U. S.

[Soraya Benchikh, CFO, Member of Management Board & Executive Director at British American Tobacco]

Combustibles business return to growth for the first time since 2022. This demonstrates our the resilience of our combustibles portfolio and strengthens our confidence in hitting our midterm targets. Now looking at The U. S, I am delighted to say we've returned to both revenue and profit growth. In combustibles, our improved portfolio and stronger execution including enhanced revenue growth management delivered 3.8% increase in revenue as we lapped last year's investment cycle.

[Soraya Benchikh, CFO, Member of Management Board & Executive Director at British American Tobacco]

Volume share rose by 10 basis points and value share by 20 basis And excluding the deep discount segment where we are not present, our volume share was up 60 basis points. In New Categories, revenue grew by 3.9% driven by the successful launch of Velo plus which delivered over 380% growth in Modern Oral revenue. This was partly offset by a 12.3% decline in vapour, impacted by ongoing illicit single use products. Overall, U. S.

[Soraya Benchikh, CFO, Member of Management Board & Executive Director at British American Tobacco]

Revenue grew 3.7% and adjusted profit rose 3.2%, led by combustibles, though partially offset by VUSE headwinds and investment in Velo plus Tadeo will share more on The U. S. Shortly. AME had another solid half. Revenue rose 3.5% with combustibles up nearly 3%, thanks to strong volumes in Brazil, Turkey with solid pricing.

[Soraya Benchikh, CFO, Member of Management Board & Executive Director at British American Tobacco]

New category revenue grew by 1.3%, including nearly 17% growth in modern oral, where we hold a 63% volume share. Offsets came from illicit vapor in Canada and evolving market dynamics post single use vapor bans in some large markets. Heated products growth in Poland and Portugal was more than offset by the impact of resource allocation decisions in The Czech Republic, Germany and Romania. Adjusted operating profit grew by over 10%, well ahead of revenue, driven by operating leverage and efficiency gains in combustibles, scale benefits and resource allocation in new categories and our accounting treatment for Canada. AME is a true multi category region delivering quality growth.

[Soraya Benchikh, CFO, Member of Management Board & Executive Director at British American Tobacco]

In APMEA, fiscal and regulatory headwinds in Bangladesh and Australia outweighed good performances in Pakistan and Nigeria. Total revenue was down 4.8% with combustibles down 7.9%. New category revenue increased 2.5% driven by heated products growth in Japan and modern oral gains in emerging markets, partially offset by vapour, which was impacted by strategic market exits as we shifted our focus to more profitable opportunities. Adjusted operating profit was down 12.3% mainly due to the challenges in Bangladesh and Australia. Operating margin held steady as we offset inflation and FX pressures, with a strong performance in The U.

[Soraya Benchikh, CFO, Member of Management Board & Executive Director at British American Tobacco]

S, higher profitability in new categories and continued cost savings. At current rates, operating margin grew 20 basis points. BAT has a strong track record of cost savings and we continue to build on it. Since 2023, we've delivered nearly GBP 900,000,000 in productivity savings and are on track to exceed £1,200,000,000 by year end. These savings help us manage inflation and foreign exchange impacts while funding innovation in new categories.

[Soraya Benchikh, CFO, Member of Management Board & Executive Director at British American Tobacco]

In H1, we absorbed £166,000,000 in inflation related costs and a 1% transactional FX headwind on adjusted operating profit. Looking beyond 2025, we remain focused on simplifying combustibles and scaling new categories, targeting an extra GBP 2,000,000,000 in cost of goods sold savings by 02/1930. And to further drive agility and savings, I'm excited to introduce our new Fit to Win program. Fit to Win is a three year program designed to simplify the way we work, increasing agility and embedding digital decision making. While we're still in the planning phase, we're confident it will generate around £500,000,000 in annualized savings by the 2028.

[Soraya Benchikh, CFO, Member of Management Board & Executive Director at British American Tobacco]

These savings will support our growth algorithm and fund investments and drive that drive long term profit and cash flow. Importantly, this is incremental to the 2,000,000,000 cost of goods sold target that we announced at our Capital Markets Day last year. We expect associated costs of GBP 500,000,000 over the next two years and as a one time investment, $350,000,000 of that will be treated as adjusting starting in 2025 and ending in 2027. I'll share more at our full year results in February. Earnings per share rose by 1.7%, while lower share count supported growth.

[Soraya Benchikh, CFO, Member of Management Board & Executive Director at British American Tobacco]

It was offset by our reduced share of ITC profits and higher net finance costs. Our underlying tax rate was 24.4%, and we expect a full year rate of around 25% assuming no major changes in prevailing tax rates. Translational FX was driven by sterling strength against most major global currencies with weakening US dollar contributing around 50% of this headwind. Our strong cash generation continues to enhance our financial flexibility. We're on track to deliver more than GBP 50,000,000,000 in free cash flow by the 2030.

[Soraya Benchikh, CFO, Member of Management Board & Executive Director at British American Tobacco]

And we remain focused on our capital allocation priorities, which are investing in transformation, balancing deleveraging with progressive dividends and sustainable share buybacks and selective bolt on M and A to support our transformation. In May, we increased our 2025 buyback by GBP 200,000,000 to GBP 1,100,000,000.0 with GBP $650,000,000 allocated for the second half. To summarize, H1 was ahead of expectations and the momentum we're building through this deployment year gives us confidence in delivering our full year guidance. Key growth drivers include continued strength in The U. S.

[Soraya Benchikh, CFO, Member of Management Board & Executive Director at British American Tobacco]

Led by combustibles and Velo plus acceleration in new category revenue as GloHelo and Vuz Ultra rollout and Velo maintains strong global momentum and further gains in new category contribution. With a stronger than expected H1, we now anticipate full year revenue at the top end of our 1% to 2% guidance. We maintain our APFO guidance of 1.5 to 2.5%, reflecting increased investment in new categories, a stronger U. S. Combustibles comparator in H2 and the 1% to 1.5% transactional FX headwind.

[Soraya Benchikh, CFO, Member of Management Board & Executive Director at British American Tobacco]

All of this enables us to invest more in innovation while staying firmly on track for 2026. Our H1 results show strong progress across multiple drivers, reinforcing my confidence in returning to our midterm algorithm of 3% to 5% revenue growth and 4% to 6% operating profit growth. If we exclude the regulatory and fiscal headwinds in Bangladesh and Australia, we're already hitting the lower end of our midterm targets with 3% revenue growth and 4.5% operating profit growth. In addition, I'm also encouraged by the early signs of our premium innovation rollout, which Tadeo will now talk about in more detail.

[Tadeu Marroco, CEO & Member of Management Board at British American Tobacco]

Thank you, Soraya. I would like to outline our confidence in the pathway ahead. The nicotine industry is rapidly transforming and growing as adult consumers around the world are increasingly switch to new categories. We have pursued a multi category strategy from the outset, which means we are well placed to benefit from this consumer trends. Leveraging our world class insights, innovation ecosystem, brand building and distribution capabilities, we have invested to build a well established portfolio of global brands across all three new categories.

[Tadeu Marroco, CEO & Member of Management Board at British American Tobacco]

In addition, given our global footprint and with a number of our key markets still closed to smokeless alternatives, we recognize that we must continue to invest to drive value from combustibles with a well balanced portfolio of brands across price tiers. Let me now share more detail on our new category launches. Starting with modern oral, the fastest growing new category by far, which is already reaching global scale. Its position on the risk continue was supported by a recent study, which demonstrated that smokers who switch completely to oral nicotine products, exposed to lower levels of toxicants, similar to those who quit. Modern Oral is highly successful in both traditional oral markets and new markets with no existing oral nicotine tradition.

[Tadeu Marroco, CEO & Member of Management Board at British American Tobacco]

And is also highly profitable with a fast payback, as Soraya mentioned. Following our successful launches in Pakistan and South Africa, we continue to see an exciting opportunity for Modern Oral in emerging markets, given its adaptability and affordability. Modern Ori is becoming a meaningful contributor to our group delivery, as Vilo continues to grow from strength to strength. We are clear leaders in AME, close to six times the size of our closest competitor and capturing around 60% of category growth, which highlights the further opportunity ahead. Vilo is a premium product, over indexing on value and strongly outperforming our peers across the region.

[Tadeu Marroco, CEO & Member of Management Board at British American Tobacco]

Given BAT's European modern oral leadership position, we have applied our know how and capabilities to The US. We were already confident that with the right product, we could make performance inroads in The US. And that is now being realized with Velo plus In The US, the modern oral category value of around GBP2 billion has already overtaken the size of the legal vapour market. And is expected to almost double over the next two years. With the successful launch of Velo plus we have step changed our US performance and are now the fastest growing modern oral brand.

[Tadeu Marroco, CEO & Member of Management Board at British American Tobacco]

ViloPlus is driving triple digit revenue growth and strong volume share gains. In May, Vilo had gained almost nine percentage points of share since launch. Encouragingly, the latest volume share read from July is above 17%. These results are a testament to the quality of the product, the improved strength and speed of our distribution capabilities and our sharper execution enabled by RGM. We are excited about the opportunity ahead.

[Tadeu Marroco, CEO & Member of Management Board at British American Tobacco]

Villa Plus is already number two in volume share in 11 states, including New York and Texas, which together represent around 10% of the total US category. And importantly, after investment in the initial launch and rollout phase, we expect Villa Plus to deliver a positive category contribution for the full year 2025. In heated products, GlowHilo is a breakthrough innovation that we believe will reshape the way Glow is positioned in the premium segment. Which represents over 80% of industry value. GloHilo has several new and innovative features, including fast ramp up, hitting just five seconds.

[Tadeu Marroco, CEO & Member of Management Board at British American Tobacco]

A personalized LED screen. And connectivity with the My Glow app, enabling customized sessions, find My Glow and remote locking. Alongside new upgraded consumables with enhanced taste and satisfaction, the closest to replicating cigarettes we have ever achieved. At the 2024, we launched Glowheel in Serbia. We integrated the insights and critical learnings into our rollout approach, beginning with our June launch in Sendai.

[Tadeu Marroco, CEO & Member of Management Board at British American Tobacco]

While very early days, I'm encouraged that both the consumables and device are resonating well with consumers. Glo Hilo is driving improvements in consumer perception of Glo, including brand equity and appealing design. In addition, we have captured 1.5 percentage points of volume share in just a few weeks at a premium price point. Importantly, Hilo is the first time Glow will also offer a two piece device launching as part of the national rollout in Japan this September. We will continue to roll out GLOW HELOW in a targeted way in the largest heated value pools through the second half.

[Tadeu Marroco, CEO & Member of Management Board at British American Tobacco]

It's our belief that premium vapour done right is an untapped opportunity, offering greater differentiation and value generation potential. VUZ Ultra is our initial step delivering a high quality and satisfying experience alongside a connected and highly customizable offering. Key features include as small as new smart smart pods, which automatically adjust the device to consumers prefer the flavor settings. A clear view display to easily track battery and liquid levels. Connectivity enabling find my vape and the device lock further reinforce views position as a brand consumer can trust.

[Tadeu Marroco, CEO & Member of Management Board at British American Tobacco]

Viels Ultra was launched online in Canada at the end of Q1 with a nationwide rollout from June. Initial consumer feedback has been positive. Viels Ultra is driving a strong improvement in key attributes including premium, innovative and easy to use, Capturing over two percentage points of value share since the nation since the nationwide launch. We have recently launched in The UK and Germany and we will continue to roll out in a target way through the second half. Moving to The US, the largest nicotine profitable globally and the cornerstone of our business.

[Tadeu Marroco, CEO & Member of Management Board at British American Tobacco]

This is why returning to growth here has been a key focus area for me. We have invested in strengthening our portfolio, readdressing price gaps and indexation. We have also sharpened our execution, expanding contract coverage, increasing our sales force and improving revenue growth and management and our reward programs through enhanced digital capabilities. I'm delighted we are beginning to see value being created by the actions we have taken to strengthen our portfolio and execution. Our total volume share grew 10 basis points and value share was up 20 basis points.

[Tadeu Marroco, CEO & Member of Management Board at British American Tobacco]

We are seeing broad based value share improvement across the portfolio. Our value for money brand Luxstrike continues to be the fastest growing U. S. Combustible brands with value share up 60 basis points. Value share in our super premium brands, Natural American Spirits is up 10 basis points despite pressure on consumer wallets.

[Tadeu Marroco, CEO & Member of Management Board at British American Tobacco]

And the targeted introduction of a soft pack variant has led to stabilization of the New York, the Newport brand family. I believe we have turned an important corner in The US. After significant investment, we are well positioned to build on this recovery and deliver sustained contribution to the group performance in 2025 and beyond. Turning to regulation, we are encouraged that at the state level, vapour directory and enforcement legislation has now passed in 18 US states. And we look forward to the implementation of these and more robust enforcement.

[Tadeu Marroco, CEO & Member of Management Board at British American Tobacco]

A number of states are now demonstrating that well constructed regulation can be effective in tackling illicit vapour with views volume returning to grow. In addition, we remain cautiously optimist about a more proactive approach to illicit vapour enforcement at the federal level. The new administration has been clear that technically illicit vapour is a key priority and the FDA has already taken some important first steps. Updating product classifications, closing loopholes for small shipments and seizing illicit products. While these actions have recently driven more than a 40% reduction in vapour related shipments to The US, due to the long supply chain, we are yet to see any meaningful impact on the ground.

[Tadeu Marroco, CEO & Member of Management Board at British American Tobacco]

As a result, we are not assuming any improvement in the legal vapour market in our 2025 guidance. As mentioned earlier, we continue to focus on sharpening execution and our digital transformation is a key enabler. Thanks to the strong strategic partnerships, BAT is ahead of the curve. Let me share four key highlights. First, we are a global leader in cloud adoption with 85% cloud hosting through strategic partnerships.

[Tadeu Marroco, CEO & Member of Management Board at British American Tobacco]

Second, our pioneering partnership with Microsoft enabled the rapid build of our enterprise data platform, advancing our global data infrastructure through MS fabric and next gen technologies. This empowers a data first agile organization, enhancing tools like RGM and marketing spend effectiveness. Third, this year we launched our Gen AI Lab in Dubai, making BAT the first CPG company in the region's AI hub. We've already deployed use case like AskCommany, AI powered sustainability bots and advanced consumer insight tools. And finally, we have streamlined our strategic technology partnerships, reducing IT run costs by 40%, while maintaining 99.9% uptime.

[Tadeu Marroco, CEO & Member of Management Board at British American Tobacco]

We will continue to drive BAT's digital transformation with our partners, fueling growth, enabling productivity and building a more sustainable business. Our recently announced strategic partnership with Accenture is a clear example of our digital transformation in action. We are trans transitioning our global shared service to Accenture. This partnership gives BAT access to Accenture's cutting edge technology ecosystem, including Agenetic AI solutions and this strategic collaboration with world leading technology companies. These capabilities will help us further to simplify our process, accelerate speech to market, upscale talent and reduce costs over the medium to long term.

[Tadeu Marroco, CEO & Member of Management Board at British American Tobacco]

In return, BAT's industry leading expertise in supply networks will strengthen Accenture's global supply chain and operations. This is a key step in making BATF future ready, digitally enabled organisation powered by strategic partnerships. In conclusion, as Sorae highlighted, we are on track to deliver our full year guidance. And looking into 2026, I'm confident that we will build on our underlying momentum with the key growth drivers, including the continued momentum in The U. S, AME and Vilo, lapping Bangladesh combustibles headwinds, a further increase in new category contribution and a step up in efficiencies with our new feature win programme.

[Tadeu Marroco, CEO & Member of Management Board at British American Tobacco]

To deliver 3% to 5% revenue growth and 4% to 6% adjusted profit from operations growth. And finally, I would like to share a few key takeaways from our results. We have returned to revenue and profit growth in The US, a critical milestone. Vilo is the fastest growing brand in the fastest growing new category with real momentum in The US and globally. And we are increasing profitability across our new category portfolio.

[Tadeu Marroco, CEO & Member of Management Board at British American Tobacco]

Our R and D ecosystem is delivering exciting premium innovations. And we continue to amplify our proactive approach to regulatory affairs to unlock new markets and create a sustainable level competitive playing field. At the same time, our digital transformation is accelerating, enhancing execution and unlocking further efficiencies and agility. All of this is executed with a cash focus, returning £17,000,000,000 to shareholders over the last three years, while continuing to deleverage. While there is more to do, I'm confident that we have the right strategy, capabilities and people to deliver a profitable transformation.

[Tadeu Marroco, CEO & Member of Management Board at British American Tobacco]

I'm excited about the future for BAT and I believe we will deliver long term sustainable growth and value for all our stakeholders. Thank you for listening. We will now be joined on the stage by Victoria for the question and answer session.

[Victoria Buxton, Group Head of Investor Relations at British American Tobacco]

Thank you to Deo and Soraya and good morning everyone. If you joined us via the webcast, you can type your questions directly into the online question box. Or if you have joined us on the call, you can press star one on your telephone keypad. Tadeo and Sarai will be very happy to take your questions. And I will now hand over to the operator.

[Operator]

Thank you. And our first question today comes from Simon Hales with Citi. Please go ahead.

[Simon Hales, Managing Director - Consumer Staples & Beverages Research at Citi]

Thank you. Good morning, Tobias, Roy and BB. Two or three for me, if possible, please. Today, can you just talk a little bit more about sort of the early performance that you're seeing from the GloHilo launch into Japan? Obviously, you referenced it in your presentation in terms of the recent share gain you're seeing. Qualitatively, what is the feedback you're getting on the ground from those Japanese consumers? How does it vary if at all from what you saw in the test market in Serbia? And how should we think about the scale of the rollout into other key markets through the rest of the year?

[Simon Hales, Managing Director - Consumer Staples & Beverages Research at Citi]

What percentage of your key heated tobacco markets do you expect to be in by the end of the year? And then secondly, on Modern Oral, clearly, a very strong performance coming through from VeloPlus in The U. S, and you referenced the further share gain that you've seen coming through into July as well. Have you seen any change in momentum for the brand as you exited the quarter and came into July, given that the biggest competitor on the ground is now back on shelf and perhaps being a little bit more aggressive in its point of sale promotional activity? And then finally, just really a clarification for Soraya around the Fit to Win program.

[Simon Hales, Managing Director - Consumer Staples & Beverages Research at Citi]

I think you said that there won't be any upfront costs until 2026 for that program. There's nothing in the second half of the year. Am I right on that? And I assume the 500,000,000 target over three years is a gross savings target and we should expect a chunk of that to be reinvested back into the business.

[Tadeu Marroco, CEO & Member of Management Board at British American Tobacco]

Simon, thanks for your questions. In terms of GloHilo Japan, the feedback has been really positive from consumers. And it's a portfolio was much more tailor made from the one that we have launched in Serbia for the consumer, the Japanese consumers. We have done a lot of work to get to very competitive offers because not just about the device. The device is clearly a massive step change from what we have been offering so far into the Japanese market and also anywhere else in the group.

[Tadeu Marroco, CEO & Member of Management Board at British American Tobacco]

But the consumables are also very important. And we do believe that we have a new technology on the consumables that combined with the device heating mechanism is offering, like I mentioned in my presentation, the closest that we can get from smoking a cigarette in a HP product. And this being resonating well with consumers, have to remember that, Sanday, we don't have yet the two piece device. And yet, we have achieved in few weeks, 1.5% yet at premium level that we have never been able to compete with Glow before in terms of consumables pricing. So it's quite exciting about that.

[Tadeu Marroco, CEO & Member of Management Board at British American Tobacco]

In terms of rollout for the rest of the year, we will just start because, like I said, September, Japan, and we'll be hitting the highest profit pools in the HPE category until December, but this will be just early stage. We'll be probably seeing the impact of that throughout 2026. Now in terms of modern auto, yeah, we are extremely excited with Velo plus The brand is keeping its momentum. And we when we launched the brand as any new launch in The US, we have a price list. We apply some discounts to get consumer trial.

[Tadeu Marroco, CEO & Member of Management Board at British American Tobacco]

We see that once they trial, the level of retention is still being kept at a very, very high level at 70% of retention. And we have been reducing the discount since the launch. And despite that, we carry on seeing increasing in market share and the repurchase at point of sale. So all in all, we are very, very supportive of the future growth of Velo plus in The US. Today, in terms of pricing, if you strip out the leading brands, we are at over index to what is left in the market.

[Tadeu Marroco, CEO & Member of Management Board at British American Tobacco]

And and in terms of value share based on the trend that we are seeing, we are very close to achieve the number two position. So we are and we'll be going back to positive contribution already in 2025, which is a testament that this is a category with the right product, with the right focus and execution. We can have a very short payback. So all in all, very exciting about that. So All right.

[Soraya Benchikh, CFO, Member of Management Board & Executive Director at British American Tobacco]

Hi, Simon. Thank you for the question. Just let me give a little bit of background on Fit to Win. I think over the years, we've been very good at taking out costs from the business. Fit to Win is slightly different.

[Soraya Benchikh, CFO, Member of Management Board & Executive Director at British American Tobacco]

It's really aimed at, making the organization future fit. We're basically reviewing a lot of our key work processes in the organization and embedding digital decision making basically into our processes. We're doing a full review of indirects. We're also looking at our routes to market to ensure that they're transformed in line with business transformation that we're going through. So an answer to your question in terms of the costs, we've already we we will have some costs in 2025, but this is fully included in our guidance.

[Soraya Benchikh, CFO, Member of Management Board & Executive Director at British American Tobacco]

And the 500,000,000 will be an annualized saving that we will reach at the 2028. And, yes, we will be looking to reinvest basically to fuel the growth behind our innovations.

[Simon Hales, Managing Director - Consumer Staples & Beverages Research at Citi]

Thanks very much.

[Operator]

Thank you. Our next question comes from the line of Damian McNeil from Deutsche Numis. Please go ahead.

[Damian McNeela, Director at Deutsche Numis]

Yes. Hi. Good morning, everybody. Thank you for taking the questions. The first question really is on whether you could provide us a little bit more color on the performance of the debate business in the AME region.

[Damian McNeela, Director at Deutsche Numis]

I think you sort of flagged some challenges in Canada and also the transition that's happening in some of the bigger markets like The UK. Was just wondering if you could provide some thoughts on what's happening on the ground and your expectations for vape in those markets over the medium term? And then just on The U. S. Vape and just some clarification on the 40% reduction in shipments that you've seen.

[Damian McNeela, Director at Deutsche Numis]

I guess it's very difficult to have any accurate number, but could you provide us with a sense of sort of what that means in terms of when we might expect to see a change on the ground in terms of illicit availability, please?

[Tadeu Marroco, CEO & Member of Management Board at British American Tobacco]

Okay, Damian. Look, the performance of APAME has been heavily impacted by Canada. The situation in Canada, Quebec, the largest province in in in and where most of the sales is is happening, has introduced regulations, banning all flavors and but the level of enforcement is basically known. And and we see inundation of illegal products and on top of that with these big tanks, big disposable brands, which due to duty of care, we cannot even offer anything similar to that. So as a consequence, we had a strong business.

[Tadeu Marroco, CEO & Member of Management Board at British American Tobacco]

We still perform quite nicely on the track channels, but there is a hidden market that is not showing up in the track channels that is inundating the market and making very hard for responsible companies to compete in a level playing field. So actually, so as a consequence, the headline numbers of EMEA get impacted. But one thing that is interesting happening in Europe is that the trend moving from modest to closed systems. And as you imagine, when UI mods you are selling a device, so the NTU per unit is higher when you are selling pods in the closed system. So this will translate an impact in the first moment in the top line of the business.

[Tadeu Marroco, CEO & Member of Management Board at British American Tobacco]

On the other hand, this transition actually is positive for BAT in the long run. You take UK, for example, we have an overall share just over 10% of the vapour business, including Modis. And when you zoom in into the closed system, we have a 33% share. So as this transition consolidates and we know that UK has just banned modies and the expectation is that we're going to see more and more closed system replacing modies over time, We should be seeing a return to growth in those markets. The same is happening in France.

[Tadeu Marroco, CEO & Member of Management Board at British American Tobacco]

Although France, are the closed system was already a big chunk of the market. And we have a very strong position in France with some close to 60% of market share. The same happened in Germany despite the fact there is no ban there. The consumers are naturally migrating from modest to closed system. As the closed system gets better in terms of satisfaction and is a better economic and financial equation for consumers because you don't need to buy a device.

[Tadeu Marroco, CEO & Member of Management Board at British American Tobacco]

You just buy pods over time. And one another important interesting point that we are seeing is the fact that as we said before, our idea was to explore the introduction of a premium segment like we have in HP, like we have in cigarettes across vapour that is not really there. And Infuse Ultra was our first attempt And we are really encouraged to see the results that we are getting on the ground. It's early days, but we've got more than 2% of value share in Canada with all these convoluted situation that I was referring to you. And we also be seeing a very strong traction in Germany where we have just launched few weeks ago.

[Tadeu Marroco, CEO & Member of Management Board at British American Tobacco]

And and we have just launched in The UK and we're gonna continue to roll out. So that's what is happening in in a p me in vapor. In The US, is is very difficult to predict. Because what we are seeing on the ground is that some of these key brands, they are not being found anymore in some point of sales. They are running out of the shelves.

[Tadeu Marroco, CEO & Member of Management Board at British American Tobacco]

But there is so many other offers of these type of products, illegal vapor products that basically target youth with flavors like bubble gum, rainbow candy, things that absolutely shouldn't be in the market in the first place. And we are still seeing those products there. The encouraging fact on this is that the new administration, the new secretary of HHS, the new chair of the FDA has been very vocal about putting as a priorities the annihilation, if you want, of these non responsible and no conform brands. And and not just the narrative, but what we start seeing on the ground, the 40% reduction in shipment is one of the data points. And because we know that some of those manufacturers, they miss declare what they are bringing.

[Tadeu Marroco, CEO & Member of Management Board at British American Tobacco]

They undervalue their shipments. So they are well aware of that. They are taking initiatives to cope with that. It's a question of consistency. So from the first angle to your question, we need to see a consistency multi agency work on that, which for the time being seems to be the case.

[Tadeu Marroco, CEO & Member of Management Board at British American Tobacco]

And at the same time, we need to wait because there is a long supply chain in The US to see a meaningful impact. But this is one side of the equation. The other side of the equation is eventually to get the FDA addressing the approval process. But the root cause of all these illegality is the fact that The US consumers don't get enough smokeless products. And that's something else that we hope that the FDA will address over time.

[Damian McNeela, Director at Deutsche Numis]

That's great. Thank you very much today.

[Operator]

Thank you. Our next question comes from the line of Ray Bigham with Anchor Stockbrokers. Please go ahead.

[Rey Wium, Research Consultant at Anchor Stockbrokers]

Hi, good morning, Tadu, Soraya and Victoria. If I can just start off with The U. S. On the combustible side, yes, it's quite I think you see that the volume decline has sort of now used to 7.6%. I just want to know whether I mean, what is your sort of indication for the remainder of the year?

[Rey Wium, Research Consultant at Anchor Stockbrokers]

Is there chances of this rate of decline to ease further? Or is that pretty much where we are going to stabilize? The other question that I have is just on, I mean, a very strong performance from Belo plus in The U. S. Now I just want to know, obviously, you are still writing approval for, I guess, Belo two.

[Rey Wium, Research Consultant at Anchor Stockbrokers]

If you can give us any update on that. And given that VLO plus is already doing so well, I mean, what are you thinking around VLO two when that becomes available? And my last question is just a clarification because honestly, I'm a bit confused in terms of your adjusted EPS number. You show it as 162, but I also see a number that I can't find anywhere in the present in the release, which is the 155.5, which exclude or makes the adjustment for Canada, including currency. So, I mean, maybe if you could just help us understand what is the real number that you are looking at and what you want us to focus on because, I mean, the adjusted EPS on that page is actually down 2.4% and not up.

[Rey Wium, Research Consultant at Anchor Stockbrokers]

So that will be very helpful just to get some understanding of how we need to think of this one. Rick.

[Tadeu Marroco, CEO & Member of Management Board at British American Tobacco]

You for the question. So I will cover the point on the adjusted EPS. In terms of volume, industry wise, we are seeing a slightly improvement compared with the previous year. It's not meaningful. Previous year at this point in time was overall 8.5% decline.

[Tadeu Marroco, CEO & Member of Management Board at British American Tobacco]

This year, it's more on eight percent. I don't think that we'll be seeing a meaningful variance to that until the end of the year. There are the consumers in are still very stretched. The level of confidence is still low. But obviously, this has been offset partially by the fact of gas price has been reduced.

[Tadeu Marroco, CEO & Member of Management Board at British American Tobacco]

And we note that there is a correlation, inverse correlation between gas price and sales of cigarettes in The US, which has been supportive of volumes more recently. And the other big question market is in terms of how much more enforcement in the illegal vapour disposable products they can do in The U. S. Because we also know that some of the weakness that we see in the combustible business are related with the availability of these products in the market. And obviously, if you expect some enforcement, at least the switch out from out of combustor to add these products will probably be reduced.

[Tadeu Marroco, CEO & Member of Management Board at British American Tobacco]

In terms of Reynolds, we are very pleased with our performance. It shows that all commercial plans that we put in place in the last two years is resonating with a strong performance on the ground. You can see that by the market share increase, the value share increase. Our price mix has been very robust. Obviously, we have taken some decisions and mainly pricing related in 2023, 2024 that makes this half year a bit more softer comparator.

[Tadeu Marroco, CEO & Member of Management Board at British American Tobacco]

That's why we call the tension that the second half will be a bit more stronger, the comparator for The U. S. Combustibles in general. But overall, we feel very confident about keeping the momentum. And remember that we have always said for us to go back to the 3% to 5% group algorithm in terms of revenue.

[Tadeu Marroco, CEO & Member of Management Board at British American Tobacco]

What we need is combustible as a group to deliver between 1% to 2%. And The US in that equation will come between zero to 1%. So we are tracking well ahead of that. So in the medium long run, if we are able to at least deliver zero to 1%, we have all the possibilities to with the complement of the other two regions, which now we expect to bet to lap Bangladesh from the next year onwards. And hence, it's going back to the likes of 2% plus new categories to get back to the algorithm.

[Tadeu Marroco, CEO & Member of Management Board at British American Tobacco]

So that's the combustible side. The Villa Plus, it's a the biggest differentiation of Villa Plus, obviously, the execution, the way we are the Reynolds was able to launch a product from scratch to 135,000 outlets, that's the case today in six months is something remarkable. But on top of that is the product that brings more moisture to the market. And the Vivo two point zero that you are referring to, and that's how we refer here as well. It's brings even more moisture is the ones that we have in Europe that is very successful.

[Tadeu Marroco, CEO & Member of Management Board at British American Tobacco]

That's why we were highlighting the case. We don't talk much about ex The U. S. But the fact is that our Vuelo brand is almost six times higher in volume than the second place in particular region. So this product will be complementary to the VeloPlus, because VeloPlus has been so successful that this probably will be complementary.

[Tadeu Marroco, CEO & Member of Management Board at British American Tobacco]

It's very hard to predict when this gets approved. And it's back to the point that I just made recently in the previous answer. This is one area that the FDA needs to address is the rhythm of approval. Because there was million of submissions done over the last five years with a handful of 25 or so MGOs given, which is basically not enough to address all the consumer needs in The U. S.

[Tadeu Marroco, CEO & Member of Management Board at British American Tobacco]

Because we are seeing more and more poly users in The U. S. So hopefully, the FDA can address that. We can speed up some of this process. And this guarantee that the success that we are seeing today in Vivo plus can be maintained with the pipeline of Vivo that we have outside The US.

[Soraya Benchikh, CFO, Member of Management Board & Executive Director at British American Tobacco]

Okay. On on on the EPS, basically, you're looking at one sixty two point one, which is on the constant basis. The one fifty five point five that you see is on current basis. There is an adjusting item, which is our Canadian adjustment, but Victoria and her team are happy to provide you with a full reconciliation. But the number you should be looking at is 162.1.

[Operator]

Thank you. Our next question comes from the line of Gaurav Jain with Barclays. Please go ahead.

[Gaurav Jain, Head of EU SMID, EU packaging, and Global Tobacco and Cannabis at Barclays Investment Bank]

Hi, good morning, Tadeo. Good morning, Shariah. Three questions from me. So first is on your U. S.

[Gaurav Jain, Head of EU SMID, EU packaging, and Global Tobacco and Cannabis at Barclays Investment Bank]

Cigarette pricing, which was almost 12% ahead of your big competitor, and there was clearly a lot of discussion around double drawbacks in The U. S. Market and in the press releases or in all these newspaper articles, Reynolds has mentioned a lot. So could you talk about how double drawback is impacting The U. Business?

[Gaurav Jain, Head of EU SMID, EU packaging, and Global Tobacco and Cannabis at Barclays Investment Bank]

How much it has changed on a Y o Y basis in terms of contribution to your portfolio? So that's my question number one. Then question number two is on your overall e cigarette strategy, it seems you have exited a few markets, especially in APMEA, like Malaysia, etcetera, called out. So is like something bigger happening in your overall global e cigarette sort of portfolio, the way you think about it? And then the last question I have is on your Velo plus So amazing growth in The U.

[Gaurav Jain, Head of EU SMID, EU packaging, and Global Tobacco and Cannabis at Barclays Investment Bank]

S, 1,100,000,000 pouches in One Edge. And if we just extrapolate these market share trends, what you are highlighting and what we see in the scanner data, you could be doing like six excess volume next year, assuming market keeps growing and you'll get your fair share. So do you have that kind of capacity or will you run into capacity shortages at some point of time? Thank you.

[Tadeu Marroco, CEO & Member of Management Board at British American Tobacco]

Okay. Well, so let me start with the drawback. The this is a long stand legal framework to incentivize manufacturing in The US and generate employment. And that's exactly what Reynolds is doing. And so there is a positive impact on the top line coming from the these these these legal framework.

[Tadeu Marroco, CEO & Member of Management Board at British American Tobacco]

And but we would be growing anyway independent of the the the duty drawback. So because there are three major drivers behind that. The first one, it's the more important one is the performance itself. It's the fact that we are growing market share, value share. Our price mix is very robust.

[Tadeu Marroco, CEO & Member of Management Board at British American Tobacco]

The fact that we have outperforms the market in terms of volume. If you see the overall industry, like I said, is more in the 8% to 8.5% decline. We declined less than that. So all this combined, which I call performance, is better. And this is the major driver.

[Tadeu Marroco, CEO & Member of Management Board at British American Tobacco]

We also giving what I said more recently in the previous question, we are lapping a more softer competitor because we took some decisions in 2023, 2024 that resulted in some inventory moves. And this also contributes to the very high growth rates that you saw on the combustible level. And finally, you have the drawback that is Reynolds at the back of that balancing out all these structural decline that we have in volumes in The U. S, compensating that through more exports from The U. S.

[Tadeu Marroco, CEO & Member of Management Board at British American Tobacco]

To other markets, generate more employment, and more importantly, buy more leaf as well that is supportive of the farmers in The U. S. So that's about the first question. I'm gonna skip to the Villa Plus because I need to your help to understand better the second. But the Villa Plus question is all the shares that we are referring to consumer offtake shares, not shipment shares.

[Tadeu Marroco, CEO & Member of Management Board at British American Tobacco]

So you are right, we are growing fast. And because we need to remember that we came from a very small position back end of last year. We barely have something like 67% of the market. Like I said, our latest number in July is already in the 17% mark. And as I said, when we launched Vivo plus the fact that we have been so entrenched in this category outside The US allow us to migrate machinery and shortcut the leading time to produce those machinery.

[Tadeu Marroco, CEO & Member of Management Board at British American Tobacco]

So we are very well equipped to the pace of growth that we are seeing in Villa Plus. So we are not expecting any type of difficulty in that sense in The U. S. And the second question

[Soraya Benchikh, CFO, Member of Management Board & Executive Director at British American Tobacco]

try and help a little bit, Gaurav, with the second question. I think you're referring, if I understood correctly, about some of the APMEA resource allocation decisions that we took. It's basically what what we've had to do is prioritize given that we're rolling out invest innovations in all three three categories. And we have a lot of innovations this year with Velo plus in The US, Velo that continues globally, Vuz Ultra, and Glow, Glow Helo, which requires a lot of investment. So we've made some purely resource allocation prioritization, basically, to fund the investments in the largest profit pools.

[Soraya Benchikh, CFO, Member of Management Board & Executive Director at British American Tobacco]

That's what it is. It's not really detracting from these markets. It's just a question of focusing our resources so we can fuel growth across all our innovations.

[Tadeu Marroco, CEO & Member of Management Board at British American Tobacco]

And and part of that is eventually moving out of so I think that you were referring to Malaysia vapor. Yes. We had to move out of Malaysia vapor because it's another market that lost completely the possibility of enforcement. So and when there is no enforcement, it's very hard to compete. So if you don't have a level playing field and then you align to that, they need to be smart in the way we deploy our resource.

[Tadeu Marroco, CEO & Member of Management Board at British American Tobacco]

And we will make some decisions if that's the case. We try to engage with the government as soon as we can to address the regulatory environment. If we are not able to do, we have to make our calls and Malaysia vapor is one of those.

[Gaurav Jain, Head of EU SMID, EU packaging, and Global Tobacco and Cannabis at Barclays Investment Bank]

Thank you so much.

[Operator]

Thank you. Our next question comes from Faham Baig with UBS. Please go ahead.

[Faham Baig, Executive Director - Equity Research at UBS Group]

Good morning, team. Thank you for the thorough presentation as well as the Q and A. A couple from me, if I may. Firstly, you have now raised top line guidance twice in the past two months, but the EBIT outlook continues to be reiterated. Can you dive a bit deeper in where the incremental investments are being spent, which you did not budget for at the start of the year?

[Faham Baig, Executive Director - Equity Research at UBS Group]

And how you expect these investments to pay back in 2026? And the second question, just can you remind us where we are on ITC hotels? I know you've given your view on this asset previously, but where are we in the process of divesting that stake, please? Thank you.

[Soraya Benchikh, CFO, Member of Management Board & Executive Director at British American Tobacco]

Okay. Shall I to Yes. Yes. Thank you for that, Faham. Firstly, I think we're let's say we're very, very pleased with the h one performance.

[Soraya Benchikh, CFO, Member of Management Board & Executive Director at British American Tobacco]

But I think let me take it from the top line and then and then talk about the EBIT guidance. The top line, if we look at the 1.8% growth, it's important to, remember that we're lapping, the investment in h one in The US. So if we looked at the 1.8%, it really equates to 1.4% growth. And that means that we are second half weighted. So because we've got quite a lot of innovations rolling out as we've mentioned in the presentation.

[Soraya Benchikh, CFO, Member of Management Board & Executive Director at British American Tobacco]

I think it's also important to to note that the one and a half to two and a half guidance in in EBIT that we haven't changed even though the we're at the top line of our NTO growth. We have these innovations, and we're funding the rollouts there. It's not that we didn't anticipate it, but we would like to retain the flexibility to increase the funding to further fuel the growth going into 2026. It's also important to to bear in mind that we have had some tariff impact. It hasn't been significant, but we have absorbed it into our guidance.

[Soraya Benchikh, CFO, Member of Management Board & Executive Director at British American Tobacco]

But the main reason is really us to preserve the the the ability to increase our investments behind the innovations. And the innovations, as you know, are the VUSE Ultra rollout, GloHelo that we're rolling out the second half of this year, and obviously the continued momentum behind Velo plus in The US and Velo globally. I don't know if you want to add something.

[Tadeu Marroco, CEO & Member of Management Board at British American Tobacco]

No. I think that is right. I would just say that is we are in a position that we have never been in the past. As a company, we have now very, very competitive product in every single category. It's very exciting.

[Tadeu Marroco, CEO & Member of Management Board at British American Tobacco]

We spoke about that in the CMD October, all the efforts, all the strategic partners we were leveraging. And we are seeing some of those products now hitting the market. And so what I just referred to them, and it's a very strong position to be, very pleased with that. But obviously, this requires more discipline in terms of investing and they are they will translate in future for future drivers of growth for the company and which is supportive of our guidance moving forward in terms of top line and bottom line as well. On the hotels, on ITC hotels, I have said before, I continue saying that we strategically speaking, we don't intend to be shareholders in a hotel chain in India and or outside India.

[Tadeu Marroco, CEO & Member of Management Board at British American Tobacco]

But the fact is that there are some bureaucratic steps that needs to go through in terms of the way that our shareholders of that dates back to early nineteen hundred. And I said, they gave this explanation before. And sometimes things takes longer for us to be able to unlock those shares, get the right approvals in the right forums, in this case, a Central Bank in India, in order to be able to transact. And once we are in this position, you'll be thinking about that because this will be supported for us going back to the corridor of 2.5 to two times by the 2026. So we intend to use the proceeds of the hotel to deleverage further the company.

[Faham Baig, Executive Director - Equity Research at UBS Group]

Thank you, guys.

[Operator]

Thank you. Our final question comes from Andre Anden with Jefferies. Please go ahead.

[Andrei Andon-Ionita, VP - Global Tobacco Equity Research Analyst at Jefferies]

Hi, good morning, Tadeel, Sarai and Vibi. And thank you for taking my questions. A couple from me, please. First, in Modern Oral in Europe, you were the beneficiary of a majority of category growth in H1. Could you perhaps tell us more about the actions you've taken to preserve this advantage in Europe given, competitor has been increasingly assertive on growth outside The U.

[Andrei Andon-Ionita, VP - Global Tobacco Equity Research Analyst at Jefferies]

S? And then second, on U. S. Modern Oral, I noticed VeloPlus is already in 135,000 outlets, which I think is ahead of the previous target for fiscal twenty twenty five. Are there any incremental distribution gains still to come in H2?

[Andrei Andon-Ionita, VP - Global Tobacco Equity Research Analyst at Jefferies]

Or are you happy with the current distribution base? Thank you.

[Tadeu Marroco, CEO & Member of Management Board at British American Tobacco]

Okay. Thank you, Andrew, for the question. In terms of Vielo Plus, I will start from the second one. We in 135,000 outlets, we are more than a bit more than 9% of the value of the category. So we we don't really need to to to go much beyond that.

[Tadeu Marroco, CEO & Member of Management Board at British American Tobacco]

But what we are seeing is there is a lot of retailers that are buying from wholesalers because they want to have the product and not necessarily is being support directly by us. And probably so it wouldn't be a surprise to see this number going further, but it is already what we consider optimum number. Our focus now is actually to improve awareness of the brand because it's too low, which also demonstrates further potential for the brand. And activate trial because once the consumer tries the product, like I said, the level of retention is very high. And you have to remember that modern oral in The US, average daily consumption is three pouches, whilst in AME as a region is six pouches.

[Tadeu Marroco, CEO & Member of Management Board at British American Tobacco]

And Sweden, which is a very mature market, is 12 pouches. So there is a lot of potential growth in terms of the category, provided to give them a satisfying product, which Velo plus seems to be addressing this right now as we speak. And that's the reason why we consider the category has a potential to almost double in the next couple of years. In terms of modern or outside The U. S, yes, there is a lot of new competitors coming in.

[Tadeu Marroco, CEO & Member of Management Board at British American Tobacco]

The more established one, but also new ones. Because as I said, it's the fastest growing category, new category. It's also the one that tick the box in a number of areas, is in terms of risk continue is probably one of the lowest risks involved. It's very close to a nicotine replacement therapy. There is no inhalation.

[Tadeu Marroco, CEO & Member of Management Board at British American Tobacco]

In terms of affordability, you can address the likes of emerging markets, for example, because there is no device involved on that. And in terms of margins, if anything, even higher than cigarettes. So obviously, there is a lot of attraction there. So what we are doing, you just saw one of the shots that I presented in my presentation. I was covering one of the innovations of Veelo that we are putting launch in the market in the next couple of months.

[Tadeu Marroco, CEO & Member of Management Board at British American Tobacco]

And this is about us keeping the momentum and being able to offer consumers more innovative products around that and also expand behind brand building. And we have been doing that diligently through a number of years now. And some of the resource allocation decisions that we have spoke about is exactly to support the growth of Villa that is going from strength to strength. Okay?

[Victoria Buxton, Group Head of Investor Relations at British American Tobacco]

Okay. Well, thank you very much for your questions. I'm afraid that's all we've got time for today. The IR team will answer any outstanding questions that will remain on the web. And with that, I'll hand back to today for closing remarks.

[Tadeu Marroco, CEO & Member of Management Board at British American Tobacco]

Okay. Thank you all for listening today and for your questions. To close, we are on track for our full year guidance, having delivered H1 results slightly ahead of expectations. And looking to 2026, I'm confident we have the right building blocks in place to deliver our mid term algorithm. We will continue to reward our shareholders through strong cash returns, including our progressive dividend and sustainable share buyback and deliver long term growth and value creation. Thank you again for joining us.

Participants

Executives

• Tadeu Marroco, CEO & Member of Management Board
• Soraya Benchikh, CFO, Member of Management Board & Executive Director
• Victoria Buxton, Group Head of Investor Relations

Analysts

• Simon Hales, Managing Director - Consumer Staples & Beverages Research at Citi
• Damian McNeela, Director at Deutsche Numis
• Rey Wium, Research Consultant at Anchor Stockbrokers
• Gaurav Jain, Head of EU SMID, EU packaging, and Global Tobacco and Cannabis at Barclays Investment Bank
• Faham Baig, Executive Director - Equity Research at UBS Group
• Andrei Andon-Ionita, VP - Global Tobacco Equity Research Analyst at Jefferies