Imperial Brands enjoys 'much stronger' tobacco pricing mix
Imperial Brands said its tobacco business was enjoying "much stronger" sales in the second half of the year and said it plans to launch its heat-not-burn tobacco product early in 2019.
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Ahead of a capital markets event in London on Tuesday, the FTSE 100 group said it remained on track to hit its targets for constant currency revenue and earnings growth in the year to 30 September, with stronger pricing offsetting slightly weaker tobacco volumes in the second half.
Tobacco companies have been burned in the past few weeks by investor concerns about emerging markets and regulation, with the US Food & Drug Administration threatening a crackdown on the 'epidemic' of youth vaping.
Imperial reported increased revenue from what the industry calls next-generation products, which includes its Swedish snus product and the 2015 acquisition of the 'blu' electronic cigarette brand, where the myblu pod-based system is expected to have an annualised run-rate of around £0.3bn by the end of the year. Added to the portfolio from early next calendar year will be the heated tobacco product, which the company announced will be called Pulze.
The core tobacco business is delivering a "much stronger" second half, albeit the second half volumes were slightly weaker than the first but still will outperform the industry for the full year. In the first half, tobacco sales volumes had fallen 2.1% in the six months to 31 March, outperforming an industry-wide fall of 5.7%.
Imperial said this will be more than offset by significantly stronger tobacco price/mix in the second half, which together with increased NGP revenue, will result in revenue growth in line with the guidance range.
Cost optimisation savings will be slightly above original £100m expectations, while currency swings will have a 3% impact on earnings.