Tobacco shares hit on US menthol ban fear

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Shares in two tobacco giants have been hit by reports that US regulators are planning to ban menthol cigarettes.

Shares in British American Tobacco fell 9% to their lowest level for nearly five years, while Imperial Brands shares fell 4%.

A report in the Wall Street Journal claimed the US Food and Drugs Administration would impose the ban.

Analysts said menthol cigarettes sales account for a quarter of BAT’s earnings and a tenth of Imperial Brands’.

The newspaper report suggested the US authorities are planning a ban just days after cracking down on flavoured e-cigarettes.

BAT owns one of the most popular menthol brands, Newport, after it splashed out $49bn (£38bn) on rival RJ Reynolds last year.

Analysts at Barclays estimated US sales of menthol cigarettes account for around 25% of BAT’s annual underlying earnings and around 11% of Imperial Brands’s earnings.

But the menthol ban could take up to two years to come into force, with a year for the rules to be finalised and a further year for the ban to be enforced in the marketplace.

In 2013, the Food and Drugs Administration concluded that menthol cigarettes are harder to quit and pose a greater health risk than regular cigarettes.