British American Tobacco PLC on Wednesday reported strong interim profit, thanks to New Categories, robust performance in combustibles and cost reduction.

The London-based maker of cigarettes and vaping products saw its pretax profit rise sharply by 73% to £5.30 billion for the six months that ended June 30 from £3.06 billion a year before.

Revenue though was up just 3.7% to £13.34 billion from £12.87 billion, driven by New Categories, which made ‘good progress’ towards the £5 billion target by 2025.

Revenue from New Categories rose by 29% to £1,656 million. New Categories contributed £201 million increase to profit as losses reduced.

New Categories includes new innovative products like vapour, other tobacco products, and Modern Oral, which involves Lyft, Velo and other modern white snus.

Top-line growth also benefitted from robust delivery in combustibles in the Americas & Europe, and Asia-Pacific, Middle East & Africa, offsetting the US foreign exchange tailwind gave revenue a boost as well, due to the relative weakness of sterling, particularly against the dollar.

Revenue in Combustibles rose by 1.8% to £10.96 billion, while revenue from Non-Combustibles increased by 18% to £2.22 billion.

BAT said ‘other operating expenses’ dropped by 29% to £3.62 billion from £5.09 billion.

On February 9, BAT declared an interim dividend of 230.9 pence for 2022, payable in four equal quarterly instalments of 57.72p in May, August, November 2023, and February 2024.

Over six months, earnings per share more than doubled to 176.6p from 81.2p.

‘Having been in my new role for 10 weeks, I’m pleased with the resilient performance of BAT in the first half of 2023 and the renewed sense of energy across the organisation,’ said BAT Chief Executive Tadeu Marrocos, who stepped into the CEO role in may.

‘It is a challenging external environment. High inflation and slower global growth are impacting consumers and business. Yet our revenue, profit from operations and earnings are all up,’ Marrocos said.

Looking ahead, BAT kept its full-year guidance unchanged.

Global tobacco industry volume are expected to be down 3.0% partly due to the US, Pakistan and uncertainty over Russia-Ukraine.

Shares in BAT were up 2.3% to 2,695.50 pence each in London on Wednesday morning.

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