A-Brands

Imperial Bets On Price Hikes, Tobacco Alternatives For Growth

By Donna Ahern
Imperial Bets On Price Hikes, Tobacco Alternatives For Growth

Imperial Brands is betting on higher cigarette prices and strong demand for tobacco alternatives over the next six months, after a rise in first-half profit at the maker of Winston cigarettes and Backwoods cigars.

After years of slow growth and market share losses, Imperial outlined a turnaround plan in 2021 focusing on its five top markets and beefing up investments in next-generation products (NGP) deemed less harmful to health.

Sales of Imperial's NGP brands, which include Pulze heated tobacco and blu e-cigarettes, were up 19.8% in constant currencies, it said in a statement on Tuesday.

Revenue Increase

Its adjusted operating profit was up 0.8% to £1.6 billion ($2 billion) on a revenue rise of 0.3% to £15.41 billion for the six months to 31 March.

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"Imperial's current strategy is akin to rolling out 'me too' type products across a range of European markets - but losses are increasing again. This will need to shift to strong sales or proper innovation if it is to have appeal over the long-term," said Chris Beckett, head of equity research at Quilter Cheviot.

The United States, Britain, Germany, Spain and Australia are the biggest markets for revenue at Imperial, which maintained its full-year outlook for adjusted operating profit.

'Consumer Buying Patterns'

Imperial's results were largely in line with expectations after an update last month that flagged the impact of its Russia exit and a cooling off in demand from COVID-19 pandemic highs, with little change in its share price on Tuesday.

"We expect the year-on-year effect of consumer buying patterns to normalise in the second half," Imperial said in a statement, adding that cost inflation, a stronger dollar and increased NGP investments remained an overhang.

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"This (the second half) will be a truer test of how resilient smokers remain to price rises," said Hargreaves Lansdown analyst Derren Nathan.

Read More: Imperial Brands Expects First-Half Revenue Drop On Russia Exit

News by Reuters, edited by Donna Ahern, Checkout. For more A-brand news, click here. Click subscribe to sign up for the Checkout print edition.

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