By Emma Rumney and Shashwat Awasthi
Feb 12 (Reuters) - British American Tobacco announced a new AI-driven productivity programme expected to lead to job cuts on Thursday, while reporting higher annual profit as its Velo nicotine pouch gained U.S. market share and sales of newer products picked up.
The interim finance chief, Javed Iqbal, said the programme would see BAT, which sells cigarettes, tobacco and other nicotine products, simplify and automate using data analytics and AI tools, adding it would affect
staffing levels.
It "will have an impact on the size of the organisation," he said on a call, adding it was too early to say how much of the workforce would be affected.
The productivity drive comes as Velo is winning market share from Philip Morris' Zyn and Altria's label On! in the key U.S. market, due to distinguishing features such as higher nicotine strengths and lower pricing.
"We are extremely encouraged by the U.S. performance of Velo," CEO Tadeu Marroco said on the call. "There is still plenty of opportunity for Velo to carry on growing."
BAT shares, which surged 46% last year, were little changed in morning trading, after earlier slipping 2%.
VELO AND VUSE KEY TO GROWTH
Velo now holds the second-highest market share in the U.S., behind Philip Morris' Zyn, and helped BAT report double-digit growth in sales of new products in the second half and a 5.5% rise in U.S. revenue in 2025.
It is part of a suite of newer products which includes its Vuse vape and heated tobacco, in which BAT is investing heavily to spur growth, though some analysts warn this may drag on margins.
CEO Marroco said regulators' efforts to crack down on a booming market for unregulated vapes had helped sales of BAT's own licensed device and could reduce pressure on cigarette sales.
Still, it would take time for regulators' efforts to have an impact in the "very entrenched" market, and BAT expected to have a flat performance in its U.S. vape business in 2026, he said.
BAT reiterated its aim of hitting the lower end of its medium-term revenue growth targets of 3% to 5% and 4% to 6% adjusted operating profit growth in 2026.
($1 = 0.7344 pounds)
(Reporting by Shashwat Awasthi and Nithyashree R B in Bengaluru, Emma Rumney in London; Editing by Janane Venkatraman, Joe Bavier and Bernadette Baum)
