British American Tobacco PLC

We understand that the company is focused on reducing its leverage, and it is increasing its efforts to accelerate progress in this direction. According to the management, the company is on track to achieve a net debt on EBITDA (company's adjusted) of about 3.0x by 2021 from 3.5x in 2019. During 2019, new categories experienced some headwinds. For example, the U.S. vaping segment was affected by the U.S. Food and Drug Administration (FDA) announcement banning flavored pods, and by general category slowdown due to health concerns related to vaping products. In addition, COVID-19 has slowed down planned consumer activation plans in some of the company's key markets (such as the U.S., Japan, and Europe). BAT has postponed its £5.0 billion

...British American Tobacco PLC's (BAT's) deleveraging has been slower than we expected, although we anticipate the deleveraging trend to accelerate. To maintain the current rating, we consider the headroom for any negative deviation from our base case as very limited. We expect the company to reach and maintain an S&P Global Ratings-adjusted debt to EBITDA of 3.5x or lower, while adjusted debt to EBITDA was 4.0x in 2019 after the peak achieved in 2017 following the Reynolds acquisition. For our ratio calculations, because of ongoing legal proceedings, we deconsolidate BAT's Canadian subsidiary (Imperial Tobacco Canada Ltd.), although according to International Financial Reporting Standards (IFRS), the group continues to consolidate it. We understand that the company is focused on reducing its leverage, and it is increasing its efforts to accelerate progress in this direction. According to the management, the company is on track to achieve a net debt on EBITDA (company's adjusted) of about...

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