Wednesday 29, June 2022
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Tobacco group BAT to exit Russia, cuts 2022 outlook

Camel and Lucky Strike cigarette maker British American Tobacco Plc said on Friday it would exit Russia and cut its fiscal 2022 guidance as a result, the latest company to leave the country due to worries about the safety of its employees.

Western companies have pulled out of Russia en masse as the United States, the European Union and Britain imposed sanctions aimed at curbing Moscow's access to funding.

In response, a government commission approved this week the first step towards nationalising assets of foreign firms that leave the country.

To exit the business or stop selling or manufacturing would be regarded as a criminal bankruptcy by Russia, and they may enforce criminal actions on local management, BAT Chief Executive Officer Kingsley Wheaton told Reuters in an interview.

"There's no way, consciously, we can expose our people to criminal repercussions."

The company employs about 2,500 people in Russia, and Wheaton said it would continue to pay their salaries until it transfers its business in the country to another entity.

He said potential parties that could be interested include its Russian distributor of 30 years, which he declined to name.

In 2021, Ukraine and Russia accounted for 3 per cent of revenue, and a slightly lower proportion of adjusted profit from operations.

The company represents just under a quarter of Russia's tobacco market.

The exit prompted the cigarette maker to cut its annual revenue growth outlook to 2 per cent-4 per cent from 3 per cent-5 per cent announced last month.

It now also expects mid-single figure growth for adjusted earnings per share in 2022 on a constant currency basis, down from its previous high-single figure forecast.

Shares of the company ended the day down more than 1 per cent on the news.

The decision to exit Russia comes two days after the company said it had suspended all its planned capital investment in the country.

Stating that "the context is highly complex, exceptionally fast-moving and volatile" after reviewing its presence in Russia, BAT said it had started the process to rapidly transfer the Russian business "in full compliance with international and local laws".

SK

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