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Between the lines week 49 - December 2021

Date: 09 December 2021

A fragile tourism recovery

Global tourism rebounded in the third quarter of 2021, however, the pace of recovery is uneven. The emergence of new variants and varying degrees of restrictions, vaccination rates and traveller confidence, means international tourist arrivals in 2021 will likely remain 70-75% below pre-pandemic levels, while revenues could reach $700-800bn – less than half the $1.7trn recorded in 2019.

International tourist arrivals (% change)

BAT backs forecast in ‘pivotal’ year

British American Tobacco (BAT) saw its share price rise in early trading on Tuesday (7 Dec) after it maintained its full-year profit and sales forecast on the back of growing demand for its ‘new categories’ products.

The company had invested more than £346m in its new categories business line – including e-cigarettes, oral nicotine and tobacco heating – in the first half of the year, which helped boost sales by 50%

BAT said 2021 was a “pivotal year in our transformation” as products from its new categories business would contribute to overall profits for the first time as losses start to reduce. The company revealed 3.6 million additional customers used these products, bringing the total number of consumers of its non-combustible products to 17.1 million.

As a result, BAT maintained its full-year forecast for constant currency revenue growth above 5% and mid-single digit adjusted earnings per share growth in 2021, while also noting “the clear value of a share buyback at the current valuation”.

Share buybacks hit three-year high

Companies have paid out around $68bn through share buybacks globally between January and November 2021, the highest level since 2018.

Data from Dealogic showed companies have been using the higher profits and cash flows as they recover from 2020’s pandemic-induced slowdown to reward shareholders.

On a regional basis, Europe led the way with over $27bn of buybacks, followed by around $16bn in Japan and $8bn in the US. Healthcare was the most popular sector for buybacks, followed by finance, with a number of banks and finance groups initiating share buybacks due to a fall in corporate defaults.

Meanwhile, a surge in oil prices has boosted the energy sector, prompting companies to announce buybacks and dividends. This has included Chesapeake Energy announcing it would buy back up to $1bn of its stock, while Chevron increased its share buyback guidance range to $3bn-$5bn per year, which is in-line with pre-pandemic levels.

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Between the lines week 49

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