Imperial Tobacco’s sales suffer on tighter Russian anti-smoking laws and Middle East conflicts

August 19, 2014

Tighter regulations on smoking in Russia and continued violence in the Middle East combined to hit sales at Imperial Tobacco – but the Bristol-based global group said an emphasis on its key brands was paying off in the face of a shrinking worldwide market.

The group, which has its international headquarters at Ashton, said its underlying total tobacco revenues were down 5% in the nine months to June 30, which it described as broadly in line with the industry.

In an interim management statement it admitted conditions were still tough in a number of its key markets. Imperial’s top cigarette brands include Lambert & Butler, JPS, Davidoff and Gauloises. It also owns Rizla cigarette papers and Golden Virginia rolling tobacco.

“Although we have seen a modest deceleration in the rate of market decline in parts of Europe, this has been offset by a significant deterioration in the Russian market and the impact of the turbulent situation in the Middle East,” it said in the statement.

But its ‘growth brands’ outperformed the market with volume growth of 3% and net revenue up 7%. A far-reaching stock reduction programme was continuing to improve efficiencies by reducing trade inventories and improving supply chain effectiveness.

With the European tobacco market declining sharply, Imperial continues to look for new opportunities in what it calls ‘growth markets’. The statement said of these countries: “In several Middle Eastern markets, sales have been disrupted by the deteriorating security situation. 

“Market size declines accelerated in Russia following regulatory and excise changes, however the portfolio actions we have taken are delivering improved performance. Excluding Russia, overall market share for our ‘growth markets’ has increased year on year.”

Earlier this year it announced it is to close its cigarette factory in Nottingham with the loss of all 540 jobs. It has also sold 30% of its Spanish distribution business Logista for €518m (£415m).

In July it announced an agreement with US tobacco giant Reynolds American to pay $7.1bn (£4.27bn) to acquire a number of its brands including Winston and Maverick following Reynolds’ proposed acquisition of its US rival Lorillard. The deal is expected to complete next year.

Imperial chief executive Alison Cooper said: “I’m pleased with the continued improvement in the quality of our sales growth. The work we are doing in prioritising our brand portfolio is reflected in the strong performance of our growth brands, which are consistently growing ahead of the market and gaining share.”

Imperial stuck by its previous forecast for ‘modest growth’ for the full financial year.

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