British American Tobacco shares fall amid US menthol ban

British American Tobacco hopes to increase its hold in the global 'vape' industry.

Shares in British American Tobacco plunged 11% on Monday after US regulators announced plans to crack down on e-cigarette sales.

This week will see plans for a potential ban on the sale of flavoured e-cigarettes and menthol cigarettes across the US by the US Food and Drug Administration.

The fall in shares price wiped £7 billion from the group’s stock market value. Over the year, shares in British American Tobacco have fallen by almost 40%.

Shares in Imperial Brands also fell by 3%, wiping about £1 billion from the market value. Imperial Brands owns products including Lambert & Butler, Davidoff and Gauloises.

“Against that backdrop the company has warned that revenues from its smoking alternative products are likely to miss expectations for this year, due to a slowdown in Japan for vaping products,” said Michael Hewson, who is the chief market analyst at CMC Markets UK.

“Despite this slowdown, revenue from vaping is still expected to rise by more than 10 per cent, however, the company has warned that adverse currency shifts will hurt its full-year numbers by about 7%, as management look to justify falling short of expectations. This seems a rather high number given how stable currencies have been the past few months.”

Nicholas Hyett, an equity analyst at Hargreaves Lansdown, said: “Analysts reckon British American Tobacco generates some 20-25% of group profits from US menthol, thanks to its Newport brand. The acquisition of Reynolds gave BAT a dominant position in US menthol. That’s a segment that’s been in regulators’ sights for some time – thanks to its perceived status as a gateway for new smokers. While many menthol smokers would likely move over to non-menthol products, it would still be a major blow.”

Shares in British American Tobacco are currently trading -9.68%. Shares in Imperial Brands are currently trading -3.91% (1315GMT).