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MarketScreener Homepage  >  Equities  >  London Stock Exchange  >  British American Tobacco Plc    BATS   GB0002875804

BRITISH AMERICAN TOBACCO PLC

(BATS)
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California Lawmakers Approve Ban on Menthol Cigarettes

08/28/2020 | 02:45pm EST

By Jennifer Maloney and Christine Mai-Duc

The California state legislature passed a ban on Newports and other menthol cigarettes, following a similar measure approved in Massachusetts last year.

Menthol cigarettes have long been on policy makers' radar. The Food and Drug Administration concluded in 2013 that menthols are harder to quit and likely pose a greater health risk than regular cigarettes, and in 2018 said it was working on banning menthol-flavored cigarettes and cigars.

The California measure on Friday passed the Senate 34-0 with four of the chamber's Republicans crossing party lines to vote yes. Earlier in the week, it passed the Legislature's lower house 54-0, with dozens of legislators abstaining.

The vote came after weeks of lobbying by tobacco giant Reynolds American Inc., which makes Newport, the second-largest cigarette brand in the country and the most popular menthol variety. Reynolds, the U.S. subsidiary of British American Tobacco PLC, said the bill was "singling out communities of color."

About 70% of Black smokers in California smoke menthol cigarettes, compared with 18% of white smokers, according to the California Department of Public Health.

The ban is part of a measure barring the sale of flavored tobacco products, including all e-cigarettes except those that taste like tobacco. California Gov. Gavin Newsom earlier this year expressed support for the bill.

The governor has until Sept. 30 to sign or veto the bill, after which it will automatically become law without his signature. The ban would take effect Jan. 1, 2021.

Menthols represent about a third of the $94 billion annual U.S. cigarette market, according to Euromonitor. They account for 55% of Reynolds American's cigarette sales by volume and 19% for Marlboro maker Altria Group Inc., according to Morgan Stanley analyst Pamela Kaufman. Imperial Brands PLC makes the Kool and Salem brands.

California isn't a huge market for cigarettes -- it represents about 7% of cigarette unit sales in the U.S., according to Ms. Kaufman. But if other states followed suit, tighter federal restrictions -- such as a nationwide ban or higher excise taxes -- would become more likely, analysts said.

The U.S. House of Representatives in February passed a bill that would expand current restrictions on flavored tobacco products to include a ban on menthol-flavored cigarettes and e-cigarettes. Democratic Sen. Sherrod Brown of Ohio has introduced similar legislation in the GOP-controlled Senate.

"The more of the U.S. population already under a menthol ban, the more political cover for Congress to do the same -- which I think could happen in 2021 if the Senate flips," said Stefanie Miller, managing director at investment adviser FiscalNotes Markets.

The FDA in February implemented restrictions barring the sale of all e-cigarette cartridges except those tasting like tobacco and menthol.

A Reynolds spokeswoman said a California ban would lead to an illicit market for menthol cigarettes and racial profiling of Black smokers by police.

Write to Jennifer Maloney at jennifer.maloney@wsj.com and Christine Mai-Duc at christine.maiduc@wsj.com

 

Stocks mentioned in the article
ChangeLast1st jan.
ALTRIA GROUP, INC. -1.51% 40.38 Delayed Quote.-19.09%
BRITISH AMERICAN TOBACCO PLC 0.73% 2689.5 Delayed Quote.-17.52%
IMPERIAL BRANDS PLC -0.97% 1430.5 Delayed Quote.-20.22%
MORGAN STANLEY -0.19% 63.48 Delayed Quote.24.18%
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Financials
Sales 2020 25 664 M 34 307 M 34 307 M
Net income 2020 7 075 M 9 458 M 9 458 M
Net Debt 2020 40 638 M 54 325 M 54 325 M
P/E ratio 2020 8,53x
Yield 2020 8,11%
Capitalization 60 934 M 81 563 M 81 457 M
EV / Sales 2020 3,96x
EV / Sales 2021 3,73x
Nbr of Employees 56 689
Free-Float 90,3%
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Number of Analysts 21
Average target price 3 632,78 GBX
Last Close Price 2 665,50 GBX
Spread / Highest target 72,6%
Spread / Average Target 36,3%
Spread / Lowest Target -16,3%
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Managers
NameTitle
Jack Marie Henry David Bowles Chief Executive Officer & Executive Director
Richard George William Burrows Chairman
Alan Davy Operations Director
Tadeu Luiz Marroco Executive Director & Finance Director
David O'Reilly Director-Research & Science
Sector and Competitors
1st jan.Capitalization (M$)
BRITISH AMERICAN TOBACCO PLC-17.52%81 563
PHILIP MORRIS INTERNATIONAL INC.-9.64%119 742
IMPERIAL BRANDS PLC-20.22%18 756
SWEDISH MATCH AB39.40%12 838
TURNING POINT BRANDS, INC.36.33%736
GODFREY PHILLIPS INDIA LIMITED-28.83%639