9 December 2025
British American Tobacco (BAT) has delivered a solid pre-close trading update and remains on track to meet its guidance for the current year. Management has set expectations for 2026 at the lower end of their medium-term algorithm, but this should leave room for upgrades as the year progresses. Their focus on reducing leverage is paying off and they remain confident of hitting their target range by 2026, supported by strong cash generation and further share buybacks.
The business continues to benefit from resilient demand for combustible products in key markets, particularly the US, alongside impressive growth in its new categories. Velo nicotine pouches have been gaining share rapidly, recording double-digit revenue growth, and the company now holds a sizeable share of the modern oral segment in its core territories. Momentum in vaping is also encouraging, helped by signs of tighter enforcement against illicit products in the US.
BAT’s share price has had a strong run over the past year, with investors taking a more favourable view of the cash generation and valuation relative to global peers. Continued operational consistency, alongside the support of buybacks, will be key to narrowing the ratings gap with better-performing competitors.
Overall, this is a confident update that underlines BAT’s position as a defensive business with healthy cash flows and the potential for improving sentiment through 2026.
