British American Tobacco p.l.c. (NYSE:BTI) Q4 2022 Earnings Call Transcript

Guys, it’s not a small thing. When we said a few years ago that we will be profitable in 2025. People said, ha-ha. Now we’re saying we’re going to be profitable in 2024, and we’re going to continue to invest more because we have the brands, we have the capabilities. We have reorganized the company three times in a row. Not redoing everything every time, no, it’s blocks of transformation that we did Quantum 1, Quantum 2 and Quantum 3 to be able to do what we are doing as a transformation today in order to accelerate the delivery. So we’re on big guys. I mean, we really believe that the strategy not only is paying off, but is putting really the company forward in terms of delivery of our transformation and accelerating the delivery. Of course, at the same time, you have the net debt to EBITDA, you have to take care of that.

Your balance sheet and everything. So we continue to invest hard and continue to plow through. I’m on the mid-to long term. Tadeu and myself, we see these numbers all the time, and of course, we want to do the best for the business, and you will see us for some time.

Operator: Next up we have Gaurav Jain from Barclays. Your line is open, please go ahead.

Gaurav Jain : Hi. Good morning, thank you. I have three questions. So first, Tadeu for you on the restructuring charge in the comment you said. So last year, BAT had restructuring of £770 million. And over the last 12 years, it is £400 million on average. And now you are saying, going forward, it will be zero. So if I had assumed a £400 million restructuring charge for next year your adjusted EPS growth will be high single digit. Is that the right way to think about that it?

Jack Bowles : Good one.

Tadeu Marroco : First of all, just to some color on the £770 million that you are referring to. We — as we highlighted in the announcement, we — within that, we have a factory closure in very costly locations, that’s there. We have pulled out of — we are closing operations in some markets, as you saw, and a place like Egypt, Yemen and they come also with some tax liabilities that need to be settled this is in there as well. And we have, like Jack said, with all the archetypes of markets and the closure of factories, we have almost 2,000 employees leaving in the next coming years and most of it in ’23. So it’s also provide there. So what we are referring you absolutely right in the sense that we believe that with the conclusion of Quantum now, we are not incurring in the restructuring, adjusted items anymore.

This will be a positive for the cash, to be honest, because when you see adjusted numbers, we are taking this out. But on the cash, there still cash outflow, some of that. There are some other elements that are noncash items. But this will be helping us more, I would say, in ’24 because a lot of this provision will result in some cash outflow happening in ’23. But from ’24, is where we expect the major benefits coming from the cash side.

Gaurav Jain : Sure. My second question is on the NGP breakeven guidance for FY’24. And a lot of people are concerned about the U.S. e-cigarette business because see, 30% of your NGP is U.S. e-cigarettes, where FDA has given two Vuse vibe menthol variants and MDO. And they also commented that Vuse was second ranked in the FY’22 youth prevalent survey. So most likely Vuse Alto menthol will also get an MDO and maybe a tobacco product also gets an MDO. So with all this regulatory uncertainty, how certain are you that you will hit NGP breakeven, in FY’24?