LONDON, July 25 (Reuters) - British American Tobacco ( BTI )

reported a 1.3% rise in half-year profit on

Thursday, exceeding analyst expectations, but said it was likely

to fall short of its 2025 ambitions on smoking alternatives.

While BAT is looking to grow its revenue from smoking

alternatives, it still makes most of its money from tobacco. But

in the United States, a key market for all of its products,

under-pressure consumers have been swapping from its more

expensive cigarette brands to cheaper alternatives or vapes.

The maker of Dunhill and Lucky Strike cigarettes says a

flood of illegal disposable vapes is also weighing on both its

tobacco and vaping business in the United States.

Chief Executive Tadeu Marroco said that investments during

its first half were helping BAT to recover U.S. market share,

but its business and consumers remain under pressure.

"I don't expect any major shift happening in 2024," he said

of U.S. consumer behaviour in a difficult economy, adding that a

cut to interest rates is needed to lift sentiment.

The company is unlikely to meet its ambition to raise 5

billion pounds ($6.44 billion) in revenue from smoking

alternatives by 2025 given the United States is a key growth

driver, he said.

Investors view BAT's ability to transition its business away

from cigarettes towards alternative nicotine products such as

vapes as critical in the face of ever-stricter regulation and

growing awareness of health risks that are driving falling

smoking rates in some markets.

Rival Philip Morris International ( PM ) is more advanced

with such efforts. It raised its profit forecast on Tuesday,

based partly on expected growth in its alternative products.

BAT posted adjusted diluted earnings for the six months to

June 30 of 169.3 pence per share, against analyst expectations

of 165.91 pence.

Organic revenue and organic adjusted operating profit fell

0.8% and 0.9% respectively. BAT had already flagged low

single-digit declines.

The company reiterated that it expects an improved

performance in the second half, leading to low single-digit

revenue and profit growth over the full year.

($1 = 0.7765 pounds)