BAT writes down $31.5 billion from the value of U.S. cigarette brands. British American Tobacco (BATS.L) acknowledged on Wednesday that its conventional market does not have a future in the long run. As a result, the company stated that it would suffer a blow of around $31.5 billion due to writing down the value of several cigarette brands sold in the United States.

Within the London market, BAT shares dropped as much as 10.2%, reaching their lowest since September 2010. Listed tobacco companies in the United States were also affected. Altria (MO.N.) shares had a decline of 3.4%, while Philip Morris (PM.N.) shares experienced a decline of 2.1% overall.

The initiative by BAT comes at a time when tobacco companies’ core businesses are under pressure from ever-tighter regulations and growing awareness of the health risks associated with tobacco use, which is driving drops in cigarette volumes in several areas.

The writedown is the first time a significant global tobacco company has written down the value of its traditional cigarette business in a critical country such as the United States. It also highlights the necessity for the industry to concentrate on alternative products.

The producers of Lucky Strike and Dunhill cigarettes emphasized that there are economic problems in the country, the emergence of illegal disposable vapes, and some consumers tired of inflation downgrading to lower brands.

According to BAT, the combination of these reasons plus the general trend away from smoking meant that the company would modify the way that all of its brands in the United States are taken into account on its financial sheet, therefore changing the value of those brands to a finite lifetime of thirty years.

According to BAT, this would result in an impairment charge of around twenty-five billion pounds, equivalent to thirty-one and a half billion dollars. Additionally, a spokesman claimed that the incident impacted the Newport, Camel, Pall Mall, and Natural American Spirit brands.

Tadeu Marroco, the Chief Executive Officer, referred to the action as “accounting catching up with reality.”

Even though he did not think cigarettes would be extinct in thirty years, he stated that it was no longer feasible to justify an endless value for those brands that would be equivalent to almost eighty billion dollars on BAT’s financial sheet.

Anti-tobacco lobby organizations welcomed the drop in cigarette sales in the United States; nevertheless, they stated that the business continued spending billions of dollars promoting the goods while the decline was occurring.

According to Erika Sward, the National Assistant Vice President of Advocacy for the American Lung Association, “No one should profit from death and disease,” she stated.

BAT also stated that it will begin amortizing the remaining value of its combustibles brands in the United States in the year 2024. This would make it the first of the big cigarette firms to accept that the worth of its tobacco brands had a time limit.

BAT, much like its competitors, has been making significant investments in smoking alternatives like vapes. Wednesday marked the addition of a new objective: to create fifty percent of its sales from non-combustibles by 2035. Additionally, the company anticipates that its business in such “new categories” will break even in 2023, one year earlier than its present prediction.

In light of the United States accusation and a “grim” future for BAT, James Edwardes Jones, an analyst at RBC Capital Markets, expressed his approval of the undertaking.

“Goodness, that’s a big number,” he remarked about the fee. He went on to say that it exemplifies the “perils of the industry” and sends messages that are less optimistic about the future of cigarettes.

According to BAT, this year’s revenue growth is expected to be at the lower end of its three to five percent range. Additionally, it anticipated an increase in sales and adjusted profit from operations in the low single digits during 2024.