(Alliance News) - Shares in British American Tobacco and Imperial Brands rose on Monday, with a delay to plans to ban menthol cigarettes in the US seen as supportive to share prices.
Shares in BAT rose 1.8% to 2,367.00 pence in London on Monday, while Imperial Brands rose 1.5% to 1,838.00p. The wider FTSE 100 was up 0.5%.
A proposed ban on menthol cigarettes in the US "will take significantly more time," US Health and Human Services Secretary Xavier Becerra said in a statement Friday, after the London market close.
"This rule has garnered historic attention and the public comment period has yielded an immense amount of feedback, including from various elements of the civil rights and criminal justice movement," Becerra said. "It’s clear that there are still more conversations to have, and that will take significantly more time."
Citi explained the US Food & Drug Administration said it would advance a ban on menthol in cigarettes in 2021 before publishing its Notice of Proposed Rule-Making in April 2022.
Having gone through initial consultation periods, the FDA had been expected to adopt a new rule banning menthol in late 2023, but the plan was held-up by the White House.
The broker said a final rule had been expected from President Biden in the second half of 2023 but this has been stalled, probably until after the presidential election in November.
The broker said while menthol bans in Canada and the European Union have proven to have a limited impact on cigarette consumption, the uncertainty has "clearly weighed" on tobacco stock prices over the last couple of years.
Citi pointed out around 32% of the US cigarette market was menthol in 2022 with BAT the most exposed company due to its ownership of Newport.
In aggregate, Citi estimates around 25% of BAT’s operating profit globally comes from menthol cigarettes in the US, and around 10% of Imperial's.
"We believe BAT would have been most impacted by a ban, while Altria and Imperial Brands would also have been hit. As such, removal of the menthol ban risks should be taken positively by all three stocks," the broker said.
"We expect shares in BAT, Imperial and Altria to rally," the broker added.
Shares in Altria rose 0.3% to USD43.48 in pre-market trading in New York.
By Jeremy Cutler, Alliance News reporter
Comments and questions to newsroom@alliancenews.com
Copyright 2024, Alliance News
IN THE KNOW: BAT and Imperial Brands climb as US menthol ban delayed
(Alliance News) - Shares in British American Tobacco and Imperial Brands rose on Monday, with a delay to plans to ban menthol cigarettes in the US seen as supportive to share prices.
Shares in BAT rose 1.8% to 2,367.00 pence in London on Monday, while Imperial Brands rose 1.5% to 1,838.00p. The wider FTSE 100 was up 0.5%.
A proposed ban on menthol cigarettes in the US "will take significantly more time," US Health and Human Services Secretary Xavier Becerra said in a statement Friday, after the London market close.
"This rule has garnered historic attention and the public comment period has yielded an immense amount of feedback, including from various elements of the civil rights and criminal justice movement," Becerra said. "It’s clear that there are still more conversations to have, and that will take significantly more time."
Citi explained the US Food & Drug Administration said it would advance a ban on menthol in cigarettes in 2021 before publishing its Notice of Proposed Rule-Making in April 2022.
Having gone through initial consultation periods, the FDA had been expected to adopt a new rule banning menthol in late 2023, but the plan was held-up by the White House.
The broker said a final rule had been expected from President Biden in the second half of 2023 but this has been stalled, probably until after the presidential election in November.
The broker said while menthol bans in Canada and the European Union have proven to have a limited impact on cigarette consumption, the uncertainty has "clearly weighed" on tobacco stock prices over the last couple of years.
Citi pointed out around 32% of the US cigarette market was menthol in 2022 with BAT the most exposed company due to its ownership of Newport.
In aggregate, Citi estimates around 25% of BAT’s operating profit globally comes from menthol cigarettes in the US, and around 10% of Imperial's.
"We believe BAT would have been most impacted by a ban, while Altria and Imperial Brands would also have been hit. As such, removal of the menthol ban risks should be taken positively by all three stocks," the broker said.
"We expect shares in BAT, Imperial and Altria to rally," the broker added.
Shares in Altria rose 0.3% to USD43.48 in pre-market trading in New York.
By Jeremy Cutler, Alliance News reporter
Comments and questions to newsroom@alliancenews.com
Copyright 2024, Alliance News