British American Tobacco PLC on Wednesday warned of headwinds in the US amid the proliferation of illicit products, but the Kent maker expects earnings to come in line with its 2023 guidance.

The London-based maker of tobacco and other nicotine products expects to achieve a mid-single rise in constant currency adjusted diluted earnings per share for 2023.

However, organic revenue is now expected at the low end of its 3% and 5% guidance range at constant rates.

Shares in BAT shed 5.7% to 2,345.00 pence each in London on Wednesday morning. In Johannesburg, they lost 5.7% to R 557.86.

BAT predicts global tobacco industry volume will fall 3% this year.

But the company projects strong new category revenue growth amid incremental investment. It expects New Category to be broadly breakeven in 2023, two years ahead of its original target.

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

BAT Chief Executive Officer Tadeu Marroco said he is encouraged by the strong performances of Vuse and Velo, delivering strong volume led revenue growth, and increased profitability.

Marroco said the company is committed to become a predominantly smokeless business, with 50% of its revenue from non-combustibles by 2035.

Only 10% of the world’s 1 billion smokers use New Category products, he said.

The CEO said of the US the Dunhill and Rothmans producer still faced a challenging macroeconomic environment and the continued proliferation of illicit modern disposables, which continued to hit combustibles industry volume in the second half of the year.

In Americas & Europe, Asia Pacific, Middle East & Africa BAT expects to deliver another strong revenue and profit, driven by the strength of its ‘well-balanced’ portfolio of global brands.

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