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Imperial Brands' Turnaround Plan Gets Off The Ground With Solid U.S. Performance

By Donna Ahern
Imperial Brands' Turnaround Plan Gets Off The Ground With Solid U.S. Performance

Imperial Brands reported a modest rise in first-half revenue on Tuesday, helped by higher cigarette prices and double-digit sales growth of e-cigarettes and cigars in the United States.

Shares of the company rose 2.5% after the maker of Gauloises Blondes and Winston cigarettes also reiterated its full-year outlook and lifted its dividend, as Chief Executive Stefan Bomhard said his five-year plan to turn around the group, laid out in January, was working.

The company said organic adjusted revenue for the six months ended March 31 totalled 3.57 billion pounds ($5.06 billion), up 3.5% year-on-year in constant currencies, even as it faced "lower U.S. trade inventories" compared to the same period a year earlier, when global lockdowns spurred tobacco retailers to stock up on cigarettes.

Cigarette sales, however, were hit by a drop in sales at airport duty-free stores as well as a weaker tourist season in parts of southern Europe, compared to a year ago, CEO Bomhard told journalists on a call.

Revenue was bolstered by an average 5.3% rise in tobacco prices in its fiscal first half and a strong performance in the United States, where restrictions on movement were easing.

The company raised its first-half dividend to 42.12 pence a share, up from 41.70 pence last year. This comes after the company announced a cut to its annual dividend by a third last year as it sought to retain cash to ride out the pandemic.

The United States, where sales rose 8.8% in the first half, is Imperial's biggest market by sales and cigar volumes there jumped 62.5%, helped by new products.

Steve Clayton, portfolio manager of Hargreaves Lansdown's Select UK Income Shares fund, which has a stake in Imperial, was cautious on the results.

Imperial are generating plenty of smoke, but still without any real fire," Clayton said.

"The numbers were solid enough, but despite the reported growth, the underlying performance of the tobacco business was actually a small decline in profitability," he said.

The company's shares have fallen about 2.4% over the past year, while Britain's blue chip FTSE 100 index rose nearly 16% over that period.

'Turn Around Plans' 

Bomhard's plan to turn around the company includes focusing investments on its top five cigarette markets and expanding sales of tobacco-heating products in Europe and e-cigarettes in the United States.

On Tuesday, the CEO, who joined Imperial last July, said the plan was working after the company managed to stabilised its aggregate market share in the United States, the UK and Spain, after years of declines.

He also said that disciplined execution in its next- generation products business that sells e-cigarettes, tobacco heating and oral nicotine products has curbed losses in the unit, which has been a drag on the business for years.

Adjusted earnings per share for the six-month period came in at 107 pence, slightly lower than the 107.7 pence analysts had expected, according to Refinitiv data.

The UK-based company, however, kept its full-year forecast of low to mid-single-digit organic adjusted operating profit growth at constant currencies and said it expects to see modest profit growth in its tobacco business in the second half.

News by Reuters edited by Checkout. For more supply chain stories click here. Click subscribe to sign up for the Checkout print edition.

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