An example of a Twisp e-cigarette device (@twisp_s
An example of a Twisp e-cigarette device (@twisp_sa, Instagram)
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  • British American Tobacco posted a 10% increase in its headline profit over the past year.
  • This was despite a ban on cigarette sales in South Africa for five months, as well as a slump in duty-free sales due to travel restrictions.
  • But the company decided to write down the value of Twisp, a local e-cigarette producer it bought before the pandemic. 
  • For more articles, go to www.BusinessInsider.co.za

Despite South Africa’s five-month long ban on cigarette sales, British American Tobacco – owner of brands like Dunhill, Kent and Lucky Strike – managed a solid 10% increase in its headline profit for the year to end-December.

Its cigarette sales grew in the US, Brazil, Turkey, Bangladesh and Russia, but this was more than offset by declines in sales at its duty-free shops (due to global travel restrictions), the ban in South Africa and lower sales in Indonesia, where excise taxes were hiked. 

But while sales across the world dropped almost 5%, higher prices cushioned the blow. Its pre-tax profit hit £8.67 billion pounds, or R176 billion - almost R16 billion more than in the previous year.

BAT – the world’s second-largest tobacco group – estimates its share of the South African cigarette market is now around 76%, a fall of one percentage point over the past year. During the tobacco ban, sales of illicit cigarettes and smaller, Africans brands like Zimbabwe’s Gold Leaf Tobacco, which sells RG and Chicago cigarettes, boomed at the expense of BAT. 

READ | Cigarette market in SA: Winston won share, but other big brands lost after ban, survey shows

But while BAT decided to write off part of the value of its Malaysian business last year due to illicit trade and other challenges in that market, it decided the situation in South Africa is not that bad.

“This review recognised that the suspension of operations in South Africa was not sufficient to lead to an impairment of goodwill in that market,” the company said in a statement.

Still, it will write off R220 million in the value of its South Africa e-cigarette brand Twisp, which it bought in 2019 for an undisclosed amount. Vaping sales in South Africa were “restrained” because sales of these products were also suspended until August, BAT said.

“Since the lifting of the sales suspension, our vapour operations have started to recover, and we remain confident of the category potential in South Africa, yet we recognised an impairment of Twisp of £11 million in 2020 ahead of the planned migration to Vuse.” BAT is consolidating all its vapour brands under the Vuse name.

BAT reported that in the past year, it gained three million more customers for its “non-combustibles” brands, including vapour, across the world.

BAT and other producers have fought a tough legal battle against the South African government over the tobacco sales ban. The High Court ruled in its favour last year, finding that the ban was unnecessary. Government wants to appeal the ruling, but BAT and others said they want to oppose government's application for leave to appeal.

On Wednesday, BAT’s share price fell by almost 5% following its results.

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