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British American Tobacco plunges on threat of menthol ban

Tobacco companies likely to mount a legal challenge that would delay the process

Newport menthol cigarettes: not all analysts think a ban on menthol cigarettes is likely

Mon Nov 12 2018 - 18:08

British American Tobacco (BAT) shares plunged to the lowest level in more than four years on news of a possible ban on menthol cigarettes in the US, which would eliminate products such as Newport that generate as much as one-quarter of the company’s profit.

A senior US Food and Drug Administration official said last week that the agency is looking at restricting menthol in traditional cigarettes. More aggressive regulation of nicotine has been a major priority for Commissioner Scott Gottlieb.

British American Tobacco shares fell as much as 11 per cent in London, destroying £8.4 billion of market value. Shares of Altria Group, which makes Marlboro cigarettes including menthol flavours, fell 4.6 per cent in early New York trading.

‘Potential risk’

“BAT is the most exposed name to the potential risk,” wrote Richard Taylor, an analyst at Morgan Stanley who estimates that US menthol cigarettes account for 25 per cent of total earnings.

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Not all analysts think a ban is likely. Jefferies analyst Owen Bennett said such a move is improbable and would take years to implement.Tobacco companies would probably mount a legal challenge that would delay the process, Gerry Gallagher, an analyst at Deutsche Bank, also said. – Bloomberg

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