Smoke Clears for Imperial Tobacco as 2011 Problems Fade


LONDON -- Imperial Tobacco (ISE: IMT.L) , one of the world's largest cigarette groups, sharing space with British American Tobacco, Reynolds American, Lorillard, and AltriaGroup, announced today that it has pushed through price increases to grow its nine-month revenue by 3%.

Imperial, which sells more than 340 billion cigarettes a year namely in Britain, Germany, and Spain, said its volumes through the end of June actually fell 3%, meaning it relied on price increases to drive overall sales growth.

Chief executive Alison Cooper said that four key brands -- Davidoff, Gauloises Blondes, West, and JPS -- drove overall growth with revenues up 13%, while strong emerging market growth in areas like Asia-Pacific and Africa helped offset still-difficult markets such as Spain:

This good performance builds on the positive sales momentum we're generating across our total tobacco portfolio in both EU and Non-EU markets.

Consistently applying our sales growth drivers to enhance sales across our regions is our priority for the remainder of the year. Challenging conditions persist in some markets but we have a strong record of delivering growth in this environment and remain in a good position to continue maximising value for shareholders.

Imperial Tobacco has aimed to counter the downturn in Europe by offering cheaper cigarettes and roll-your-own tobacco products for many smokers, and also by increasing the price of brands for more affluent consumers.

The group saw a return to sales growth in the first three months of 2012 to offset a fall in the last quarter of 2011 when Spanish woes, destocking in the United States and Ukraine, and United Nations sanctions on Syria hit group revenues.

Along with the rest of the market, Imperial Tobacco shares took a beating in late 2008, though they have staged a steady comeback since -- increasing about 65% from the lows in 2009.

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One of Imperial's biggest competitors, British American Tobacco, reports half-year results tomorrow, and I'm curious to see if it's facing similar slowdown in volumes, which it's offsetting by increasing pricing.

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