British American Tobacco shares plunge amid litigation and regulatory threats

In particular, in the context of the settlement of a dispute in Canada, a strengthening of regulations in Australia, and an upcoming increase in taxes on turnover of tobacco products in Bangladesh, the share price of British American Tobacco (BAT) has recorded a sharp drop in recent days, without having yet returned to its initial level.

A decline of almost 10% in one day

Between February 12 and 13, 2025, British American Tobacco shares fell by almost 10% on the London Stock Exchange.[1], the biggest drop so far in the FTSE 100, an index of the 100 best-capitalized British companies listed on the London Stock Exchange. The tobacco company is facing a proposed multi-billion-dollar settlement aimed at ending decades of litigation with Canada's largest tobacco companies. The proposed settlement follows a landmark Quebec court ruling that tobacco companies deliberately misled consumers about the health risks of smoking. British American Tobacco has announced a £6.2 billion settlement in anticipation of the settlement.

Activity weakened by Russia's withdrawal and by changes in exchange rates

In a press release, the tobacco manufacturer reported a significant decrease in turnover for the year 2024, down by 5.2%. These poor results are mainly explained by an unfavorable change in exchange rates, but also the sale of its activities in Russia and Belarus in September 2023, following the outbreak of the war in Ukraine.. These two countries, characterized by the high prevalence of smoking in their population, represented 2.7% of British American Tobacco's turnover in June 2023[2]. However, at constant exchange rates, the manufacturer's revenue increased by 1.3% during the year 2024, mainly driven by an increase in revenues from the sale of new tobacco and nicotine products (+8.9%).

New regulations in Australia and Bangladesh penalize manufacturer

In the forward-looking statement in its press release, British American Tobacco lists all the factors that could negatively affect its economic performance. Among these variables, the manufacturer notes "the impact of unfavorable national or international legislation and regulation," and more particularly "the impact of significant increases […] in taxes" on tobacco and nicotine products.[3] ". Beyond demonstrating that the tobacco industry's opposition to public health policies, and particularly tax policies, can be explained exclusively by their effectiveness in reducing smoking, these statements also help explain the fall in the cigarette company's share price. Indeed, the latter must face a strengthening regulation in Australia, whether it is the ban on nicotine pouches in South Australia, or restrictions on the sale of tobacco products in vending machines. In addition, Bangladesh recently announced that tobacco manufacturers' turnover will now be taxed at a rate of 3%, up from 1% previously.

FT

[1] The Times, 'Significant headwinds' blow smoke over British American Tobacco, 02/13/2025, (accessed 02/17/2025)

[2] South West, British tobacco giant BAT sells its operations in Russia and Belarus, 07/09/2025, (accessed 17/02/2025)

[3] British American Tobacco (BAT), Preliminary results for the year ended December 31, 2024, 02/13/2025, (accessed 02/17/2025)

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