Tobacco firm British American Tobacco (BATS) slips 4% to £29.47 as weak cigarette sales obscure more positive news on so-called next generation products.

In a first half trading update, the company says it expects global industry volumes to fall 3.5% against previous guidance for a 3% decline.

Investors appear to be sceptical on the ability of sales of vaping products to come to the company’s rescue and remain wary of ongoing regulatory pressures.

The balance sheet is another point of concern, despite the company’s pledge to reduce its net debt-to-earnings ratio by 0.4 times a year. At the last count borrowings came in at around four times earnings – a high level even for a cash generative stock like British American.

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The negative market sentiment was reflected in a similarly lukewarm response to the company’s apparently strong full year results in February.

British American Tobacco says today it is on track to deliver revenue growth in the mid-upper half of its long-term guidance range as new product launches are expected to drive stronger second-half sales in its new generation of tobacco products.

The company maintains its full-year guidance and says it is on track for constant currency revenue growth in the mid-upper half of its long-term guidance range of 3% to 5%.

Constant currency adjusted operating profit growth is expected in the upper half of its long-term guidance range of 5% to 7%.

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Issue Date: 12 Jun 2019