British American Tobacco plans to reduce its workforce by about 20% as it pushes ahead with an AI-led restructuring aimed at cutting costs and boosting profits amid regulatory pressures and product launch delays.
The company said on Monday it would cut about 5,500 jobs and move roughly 3,500 roles to third-party firms, including Accenture, affecting around 9,000 employees in total. The restructuring excludes the U.S., its biggest market.
BAT said the program was expected to deliver 600 million pounds ($793 million) in additional annualized savings by 2028, with 500 million pounds targeted by 2027.
Still, its shares were down 1.6% to 46.73 pounds at 0940 GMT, underperforming the FTSE 100, which was down 0.3%.
"These changes affect many of our colleagues and we are focused on supporting them through this transition with care and respect," CEO Tadeu Marroco said in a statement.
He said the overhaul would make the company more agile, cost-disciplined and technology-enabled.
BAT had flagged in February that its new productivity drive could lead to job cuts, but the scale of the reductions may surprise investors, Barclays analyst Pallav Mittal said in a note.
The Lucky Strike and Dunhill cigarette maker's sales and profit growth have been sluggish in recent years, often missing or only just meeting company targets, disappointing some investors.
BAT's main profit engine, traditional tobacco, is in terminal decline, with the company predicting a 2.5% drop in industry sales volumes this year.
It is shifting toward smoking alternatives such as Vuse vapes and Velo nicotine pouches, but it has faced setbacks and trails key rival Philip Morris International.
U.S. regulators have taken a tough stance on approving licenses for new products such as vapes, delaying launches. BAT says this has fuelled an influx of illegal Chinese products, weighing on its sales and market share.
U.S. tobacco sales have also been hit as smokers swap to cheaper brands amid high living costs, while BAT also faces rising duties, tighter regulations and illicit trade in markets including Australia and Bangladesh.
BAT said most role changes had been confirmed with employees, with remaining consultations under way in line with local requirements.
