British American Tobacco (BTI) stock plunged 9.48% in pre-market trading on Thursday, following a disappointing financial performance, a hefty provision related to a proposed litigation settlement in Canada, and declining cigarette sales volume in the key U.S. market.

The tobacco giant reported a decline in revenue and adjusted operating profit for 2024, missing market expectations. The company attributed this to factors such as the sale of its Russian and Belarusian businesses, foreign exchange headwinds, and increased taxes in certain markets. Additionally, BTI booked a significant provision of $7.72 billion related to a proposed settlement in a long-running lawsuit in Canada, where the company and some rivals faced a potential payout of $22.73 billion.

In the United States, a market that contributes 53% of BTI's total operating profit, the company reported a 10.1% decline in cigarette sales volume. This was attributed to lower-income smokers cutting back on consumption due to rising prices for essential goods. Additionally, an influx of illegal, flavored disposable vapes from China has impacted traditional cigarette sales. BTI's U.S. subsidiary, Reynolds American, is attempting to address this by offering a more affordable Newport cigarette to target price-sensitive smokers.