Tobacco giant BAT in line for US tax boost
British American Tobacco, whose chairman is former Irish Distillers boss and ex-Bank of Ireland governor Richard Burrows, expects US tax changes to boost its earnings per share by 6pc this year, according to the group.
The company's brands include Benson & Hedges, Lucky Strike and Pall Mall.
Jefferies analysts estimated the 6pc benefit equates to around £400m (€453.2m), or about 2pc of sales, and suggested the investment could help BAT compete against Philip Morris International in the growing market for cigarette alternatives which are seen as less dangerous than smoking.
British American Tobacco (BAT) said that it's still working through the likely impact of US President Donald Trump's landmark tax reform, which slashed America's corporate tax rate from 35pc to 21pc.
"We anticipate that the changes will result in a non-cash exceptional tax credit as a result of the revaluation of deferred tax balances arising from the acquisition of Reynolds American," said BAT yesterday.
Last year, BAT finalised the acquisition of the 57.8pc of Reynolds American that it did not already own. It paid about $49bn (€41bn) for the stake.
BAT added that in the current financial year, it anticipates that the US changes will reduce the group's effective tax rate percentage to a figure in the high twenties.
"All other things being equal, this would result in a benefit of 6pc to full-year 2018 earnings per share, supporting our commitment to high single-digit earnings growth and increased investment in the rollout of next-generation products," it said.
Those products are typically vaping devices, which have been widely adopted.