British American Tobacco p.l.c. (NYSE:BTI) Q4 2022 Earnings Call Transcript

And we’re on the midterm to long term. So it’s about now at the moment, the balance sheet, the corridor 2 to 3 and we’ll review during the year. So I’m very confident in the quality of the business that we have. We take some decisions because we have the possibility to take decisions, and we have the choice, and we exercise that choice because it’s for the good of the growth of the company and the sustainability moving forward.

Rey Wium: Thank you very much.

Operator: Next up, we have Jared Dinges from JPMorgan. Your line is open, please go ahead.

Jared Dinges: Yes. Hi guys. Maybe first to come back to the U.S. What impact the expect on the California flavor ban across your portfolio? And maybe you could talk a bit about — maybe some very early signs if you have data from there so far?

Jack Bowles : Yes, good question. I mean California represents around, what, 5% of the total market in the U.S. and it’s a market that we are looking at, of course, very carefully. It’s very difficult to read the early signs in the California market because you had a lot of stock movements in December. As you know, the ban came in 21 of December. There was still a lot of stock that was available in the shops in January. So you’ll have to wait April, May in order to read all this. If you look at the size of the market and the way the market is faring at the moment, it’s robust, but you have to offset all these movements in terms of stocks. Our brands are doing well. We’ve launched new SKUs and e-cigarettes is doing very well also.

So we’ll have to navigate all this. And it would be too early or too confident from my side to say that the job is done. It’s going to happen in the next few months. And I’m optimistic in terms of the solidity of the business. Remember, in all the different geographies where you had that kind of things that happened, in Canada, in Europe, in Turkey or in other places, the retention rate was around 95% and more. And then on top of that, you had related to New Categories, another increase in terms of retention rates. So the jury is out, but the start is very good, but very mixed in terms of numbers. You would not be able to find your ducklings in there because it’s all stock movements, trade, availability in trade. There is the key accounts, the organized trade that has been more speedy in terms of stopping these products.

General trade is very important in California and that is less measured accurately. So, give it a bit of time. But I think that is going to be a good outcome for us.

Jared Dinges : Got it. And then maybe switching gears over to THP. It was another good year, but I noticed in the second half of the year, especially the price/mix was weaker, especially in Asia. Can you talk maybe a bit about what’s driving that, especially given that you had the launch of Hyper X2 and good device sales? I would have thought you would have had a mixed boost from that?