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Imperial Tobacco Group (LSE:IMT) reported that their customers around the world have consumed less cigarettes and tobacco in the six months ending in March 31st compared to the same period last year, due to the imposition of government regulations on smoking and austerity measures of consumers.
The maker of JPS and Windsor Blue reported stick volume equivalents down by 4.1% to 159 billion, but the company still managed to increase its revenue by 3% to £3.3 billion and posted an operating profit of £1.4 billion, 3.3% higher compared to a year ago.
Focus on Strategic Brands
With a share of 22.6% in the European Union market, Imperial Tobacco focused on strategic brands to maintain profitability in the midst of growing sentiment against smoking.
Imperial Tobacco’s Chief Executive Alison Cooper:
“I’m pleased with the ongoing success of our key strategic brands Davidoff, Gauloises Blondes, West and JPS, as well as the recent cigarette and fine cut tobacco share progress we’ve made in both the EU and emerging markets.”
In the UK, where the company holds a 45.1% market share, cigarette smoking was down 6%. More Britons shifted to fine cut tobacco, whose sales increased by 11% “as consumers continued to economise”.
“Economic and regulatory conditions are influencing consumer choices,” admitted Imperial Tobacco
Managing Regulation
Stiff government regulations have also moved tobacco companies, including Imperial Tobacco, to take their cases against the Australian Government to the World Trade Organisation over the plain-packaging law that they said encroaches on their intellectual property.
In its half year report submitted today, the company reiterated its position on the matter as a whole saying they “remain vigilant in managing regulation.”
The UK Government is also carrying out a public consultation on plain packaging of tobacco products until July of this year.
“We support reasonable regulation but will vigorously challenge extreme proposals that lack credible evidence such as plain packaging,” the company stated.
“We expect the outcome of the legal challenge against plain packaging in Australia to be announced later in the year and we will make a comprehensive submission to the UK Government’s consultation on the plain packaging of tobacco products.”
Despite that, Imperial Tobacco enjoyed an increase in market share in Australia and doubling their efforts in the light of display restrictions imposed in the UK.
CEO Comments
Talking of the general picture of the business, Chief Executive Alison Cooper commented:
“Our focus on realising the potential of our total tobacco portfolio through our sales growth drivers has delivered a good first half performance, with strong second quarter results reflecting the sales momentum we’re generating.”
“Disciplined investments are supporting our sales ambitions and we’ll continue to maximise the many growth opportunities that our unique portfolio offers to create further value for our shareholders.”
Company Spotlight
Imperial Tobacco is a international tobacco company with products available in over 160 countries and 50 factories worldwide.
A publicly traded company on the London Stock Exchange since 1996, shares of Imperial Tobacco under the symbol IMT were up 2.92%, or 74 pence higher, to £25.36, at 1:00 PM GMT, following the news.
References
↑ Company History
↑ Market Footprint in EU
↑ UK Public Consultation on Cigarette Plain Packaging
↑ Company Overview
