British American Tobacco wipes $31.5 billion off value of US cigarette brands

A major tobacco company has announced that it will be writing down the value of its US cigarette brands, including well-known names such as Camel and Pall Mall, due to the acknowledgment that the traditional cigarette market is facing a bleak future. The tobacco industry is being squeezed by tighter regulations and increasing health awareness, contributing to drops in cigarette sales in certain markets.

The company has cited economic difficulties in the United States, where some consumers affected by inflation are opting for cheaper cigarette brands, and the competition from the rise of illegal disposable vapes as contributing factors to the pressure on its US cigarette business.

As a result, the firm has decided to revise the accounting treatment of these brands, assigning them a finite lifespan of 30 years on its balance sheet. This change will lead to an impairment charge of roughly $31.5 billion. According to the company, this move is an example of accounting catching up with reality, as it is no longer viable to attribute an indefinite value to these brands, which previously stood at about $80 billion. Starting in 2024, the company will amortize the remaining value of its US combustible brands.

Following this announcement, shares in the company dropped significantly in early trading, causing a substantial decrease in its market value. Additionally, shares in a rival tobacco firm also experienced a downturn.

Alongside these developments, the tobacco company has announced its goal to generate half of its revenue from non-combustible products by 2025, as it focuses on expanding into alternatives such as vapes. An industry analyst reacted to the financial charge by noting its substantial size and acknowledged it as an indicator of the inherent risks within the tobacco industry and the future of cigarette sales.