Jul 30, 2026 earnings call — Transformation and new-category growth focus
Group revenue increased by 2.9% as New Categories grew 18%, led by Modern Oral up 66%.
Revenue $16.4B (est $16.4B) · EPS $2.25 (est $2.21)
Key quotes
"Revenue growth accelerated to 18%, driven by another outstanding performance from Modern Oral, which was up 66%."
"Building on this leadership, we will begin a phased rollout of new adult focused Vuse flavors, broadening consumer choice and leveling the competitive playing field, starting in Q3 with distribution to approximately 25,000 outlets."
"Altogether, we now expect GBP 700 million of annualized savings by 2028 with GBP 500 million to be delivered by 2027."
Analyst Q&A 7
U.S. vapour launch and U.S. combustible outlook
Q (Andrei Andon-Ionita · Jefferies): Analyst asked if illicit enforcement help for legal e-vapour will continue into H2 and details on Vuse Ultra rollout and flavors; also how to think about U.S. combustibles after strong H1.
A: Management said combustible strength in H1 included inventory movements that will unwind, so H2 should be more moderate and closer to guidance. For vapour, they expect continued traction from the legal market and will roll out flavors carefully to control youth access.
"We are -- in Q3, we'll be reaching out 25,000 outlets." — Tadeu Marroco
Velo Max launch and full-year drivers
Q (Mirza Faham Baig · UBS): Analyst asked how fast Velo Max will roll out versus Velo Plus, its economics and competitive impact; and what drives the 2.9% organic sales guidance in H2.
A: Management said Velo Max will use the existing Velo Plus distribution so rollout should be faster and Velo Max complements Velo Plus with different strengths and flavors. For the full year, they expect better H2 driven by APMEA recovery and investments, with U.S. combustible moderating and the group ending near the low end of the range.
"We are now leaders in 11 states in the U.S. And so we have a retention rate of 7%." — Tadeu Marroco
Industry volume outlook and Velo SKUs/MRTPA
Q (David Roux · Morgan Stanley): Analyst asked why global cigarette volume outlook worsened to minus 3% and how many Velo SKUs/strengths will be on the Velo platform by year-end; also asked about competitor MRTPA impact.
A: Management said the downgrade to minus 3% is driven by a large excise-driven price rise in Brazil. They said Velo will have five strengths across the Velo family after Velo Max launches and noted MRTPA outcomes help category advocacy more than immediate commercial benefit.
"So for the time being, we're going to be with the launch of Velo Max with 5 different strengths with the Velo family moving from -- as it stands today." — Tadeu Marroco
Exiting vape markets and Germany competition
Q (Damian McNeela · Deutsche Bank): Analyst asked whether exits from some vape markets and refocus to heated products are complete, what is happening in German combustibles competition, and Velo Max pricing.
A: Management said they will not disclose Velo Max pricing. They explained they exited some vapour markets in Asia and elsewhere where regulation or enforcement made legal return unviable, and these exits mostly are already done though some H2 impact may remain. For Germany, increased private-label growth caused down-trading pressure which has since stabilised.
"we decide to leave markets in Asia where we don't see either a proper regulatory environment and/or enforcement." — Tadeu Marroco
European vape outlook and duty drawback in U.S.
Q (Pallav Mittal · Barclays): Analyst asked about the medium-term outlook for vape in Europe given pressures and Poland issues, and to quantify double duty drawback benefit in U.S. combustibles and its trend.
A: Management said Poland is the major drag but they remain confident in sustaining vapour leadership in selected European markets and have a strong pipeline for H2. On duty drawback they said it was not very meaningful in H1, they won't give specific guidance for H2, and inventory movements accounted for about 2% of revenue in H1 that will be lapped in H2.
"we feel confident in our ability to sustain our leadership position in Vapour in Europe in the markets that we have selected to participate." — Tadeu Marroco
EPS guidance math and new categories outlook
Q (Rey Wium · Anchor Stockbrokers): Analyst asked to confirm EPS math given FX and guidance, and whether heated products or vapour will accelerate to help mid-teens new category growth.
A: Management agreed adjusted EPS after FX is around 4–4.5% and said the EPS upgrade is driven by below-operating profit items like lower net finance cost and strong cash conversion. They said vapour flavor rollouts are phased so most impact hits in 2027, heated products should recover share but not materially change financials, and Velo growth faces a tougher H2 comparator.
"And as I highlighted earlier, that it is mainly driven by the kickers below operating profit, mainly net finance cost and also the cash conversion, and we do get benefit from being a high cash generative business." — Syed Iqbal (CFO)
Gaps vs illicit vape and cash conversion drivers
Q (Richard Felton · Goldman Sachs): Analyst asked which gaps versus illicit vapour (flavour, device, price) can be closed by FDA guidance and what drove stronger free cash conversion in H1.
A: Management said illicit players offer large tanks and extremely high-puff devices that legal players will not make for safety reasons, so enforcement must close that gap; retail convenience channel gaps on flavors will be substantially closed by their phased roll-out. On cash conversion, lower net finance cost and strong commercial focus on cash drove H1 strength and they expect to deliver above 95% conversion for the full year.
"So I think that this -- in that channel, we'll be closing the gap substantially." — Tadeu Marroco