British American Tobacco (BAT) has posted what AJ Bell has described as a "gloomy outlook statement", as it reported that its 2026 guidance will be towards the lower end of its mid-term outlook.

In its latest trading update, the tobacco and new category products firm said that it is on track to deliver its guidance for the full year, and now expects revenue to increase by 2%.

BAT stated that its new category revenue has accelerated to double-digit growth in the second half of the year, which is set to drive mid-single digit growth in the full-year.

It also added that it is seeing strong US revenue and profit momentum, driven by ongoing combustibles delivery and an "excellent" Velo Plus performance.

However, it stated its global tobacco industry volume is set to be down by around 2% year-on-year.

BAT said that it will continue to deleverage its 2.0-2.5 times adjusted net debt to adjusted earnings target range by the end of 2026.

Meanwhile, its operating cash flow conversion is set to be in excess of 95%, while its gross capital expenditure is expected total around £650m in the 2025 financial year.

Alongside this, BAT has announced that it will increase its share buyback programme for 2026 to £1.3bn.

Chief executive at BAT, Tadeu Marroco, said: "I am particularly pleased with our momentum in the US, the world's largest nicotine value pool. Strengthened combustibles performance and enhanced commercial execution reinforce our future confidence. Velo Plus continues to deliver excellent results, reaching number two in volume and value share, with profitability on-track for full year.

"While there is more to do, we continue to prioritise investment in our most profitable markets and categories, driving accelerating new category contribution, in line with our quality growth approach."

In its 2026 outlook, the firm said that its performance will be at the lower end of its guidance, with revenue set to increase by between 3% and 5%.

Investment director at AJ Bell, Russ Mould, stated that he is less optimistic about the tobacco firm’s growth, with competition across the market and illegal products in the US affecting the industry.

He concluded: "The tobacco and vaping industry might look as if it is a ticket to easy money as customers get addicted to its products. However, BAT has shown that performance isn’t always a smooth ride.

"Shares in the tobacco group fell on a gloomy outlook statement, with 2026 performance expected to be at the lower end of targets.

"Competition is fierce in the US vape market, not helped by the sector being flooded by products from China. The US is cracking down on illegal products but it’s an uphill battle to eradicate them completely."

---