British American Tobacco (BAT) reported full-year sales growth of between 2% and 4% after an increase in consumer use of its e-cigarette range.
The cigarette maker also stated that it expected "strong adjusted operating margin improvement despite increasing inflation in our supply chain."
However, the net finance costs for the maker of Lucky Strike cigarettes are expected to be above £1.6bn, driven by rising interest rates and the strength of the US dollar.
Before markets opened in London shares in British American Tobacco (BATS.L) were down 66p to 3,344p, a 1.94% drop in the day.
BAT's end-of-year pre-close trading update reported that in the first nine months of 2022 the company saw approximately 3.2 million new consumers using their range of non-combustible e-cigarettes.
This brings the total number of users of BAT's non-combustible products to around 21.5 million people.
Chief executive of BAT Jack Bowles said: "Our exciting new product launches and innovations, supported by further geographic expansion, have enabled the addition of another 3.2m consumer within our non-combustible franchise in the first nine months, reaching 21.5m."
Richard Hunter, head of markets at interactive investor, commented about BAT's growth in 'Mew Category' e-cigarette sales.
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Hunter said: "As the industry recognises the longer term need to lessen the reliance on traditional tobacco, switching towards the fast-growing 'new category' products area, the signs for BAT are encouraging.
"New Category consumers rose by 3.2 million and now stands at 21.5 million, against a target of 50 million by 2030.
"At the same time, the group is confident of reaching its 2025 milestone of £5bn revenue and at the same time turning the unit into profitability.
"With increasingly established markets, such as the Vuse product in the US which has maintained its leading position and has a value share of 39% in that market, the group’s established scale and cash generation pulls the target closer."
The company added that sales of its combustible cigarette brands were flat in the third quarter but did not provide a full-year sales forecast for that business.
Referring to sales of traditional cigarettes, the group said value share was flat in the year to September with gains in the US and Asia offset by falls in Europe and Africa.
Chief Executive Bowles added that US sales are feeling the stress of wider macro-economic conditions and the slow recovery from coronavirus pandemic lockdowns.
He said: "In the US, industry volumes remain under pressure due to ongoing macro-economic factors and post-Covid normalisation of consumption patterns. In order to offset early signs of accelerated downtrading in the industry in the second half of the year, we have recently activated commercial plans across specific brands, channels and states."
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