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British American Tobacco [JSE: BTI] plans to cut 2 300 jobs around the world, the company announced on Thursday morning.
More than 20% of the senior roles in the companies will be affected as part of a new "focus on simplification and removal of management layers".
A consultation process is now underway with all staff who will be impacted, and it's expected that the programme will be completed by January next year.
“Since taking on the role of Chief Executive five months ago, I have been clear that I wanted to make BAT a stronger, simpler and faster organisation and ensure a future fit culture. My goal is to oversee a step change in New Category growth [vapour, tobacco heating products and oral tobacco] and significantly simplify our current ways of working and business processes, whilst delivering long-term sustainable returns for our shareholders. This is a vital first move to help achieve these goals," said CEO Jack Bowles in a statement.
"A programme of this significance involves decisions that will be difficult for our people, but ultimately it is the right thing for our business."
The company wants to reduce management layers, create fewer, larger business units, simplify all processes and better leverage its global business services.
It is the hope that this would assist in creating a more efficient, agile and focused BAT, and that it will help deliver savings that can be reinvested in the growth of vapour and tobacco heating products.
"As a result, BAT will be better placed to deliver on our target of generating £5 billion of revenues in New Categories by 2023/24,” Bowles said.
BAT owns brands like Dunhill, Peter Stuyvesant, Kent and Benson Hedges
Last month, British American Tobacco reported first-half profit growth that beat estimates. While sales volumes of cigarettes fell 3.5%, revenue from its tobacco heating product glo and Vype e-cigarettes as well as other "alternatives" grew 27%. Still, BAT is playing catch-up with Philip Morris’s IQOS and the relatively new company Juul ahead in the game.
Also, BAT could be hit if a merger between its rivals Philip Morris and Altria goes through.
Job cuts in SA
British American Tobacco employs more than 2 100 people in South Africa. Earlier this year, it announced 300 voluntary redundancies, which the company blamed on the illegal cigarettes trade in South Africa. The company contends that close to half of all the cigarettes sold in South Africa are illegal.
