Imperial Brands' Profit Growth Evaporates After U.S. Vaping Crackdown
Tobacco group Imperial Brands said it would not see any profit growth this year after tighter regulation in the United States, the world's biggest vaping market, has sapped demand.
The news pushed shares in the Winston and Kool cigarette maker down by 7% to 1,817 pence. It was the biggest loser on the broader FTSE in early trading. Rival British American Tobacco's shares were also down 1%.
The profit warning adds to the challenges for new CEO Stefan Bomhard - head of automotive services company Inchcape - whose appointment was announced on Monday with a start date yet to be disclosed.
Imperial said first-half adjusted earnings per share in constant currency were expected to drop by 10%, as it writes-down inventories following the U.S. government ban on selling certain flavours for pod-based e-cigarettes, which goes into force on Thursday.
In response to slower consumer demand, Imperial forecast net revenue would be flat and adjusted earnings per share would be slightly lower than last year.
Next Generation Products
Growth of Imperial's next generation products (NGP) has also been slower than expected.
The vaping market has shrunk in the United States after vaping-related deaths, illnesses and high rates of teen use of e-cigarettes led to increased regulatory scrutiny, including individual state bans.
"Regulatory uncertainty and adverse news flow continues to affect demand in the U.S. and Europe," Imperial Brands said, adding it would see lower year-on-year NGP revenue and increased provisions for slow-moving stock.
The company said the U.S. ban has led to a write-down of flavoured products inventory resulting in a 45 million pound ($58.55 million) impact on its first-half adjusted operating profit.
To mitigate the impact of these issues, Imperial said it would undertake a cost-savings programme, which would have an impact of 40 million pounds on its full-year adjusted profit.
Shareholders will digest the news at an annual general meeting on Wednesday.