Tobacco shares hit on US menthol ban fear

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.