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%.

Scale of reductions

"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.

Strategy shifts

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.