British cigarette maker Imperial Brands reported higher first-half operating profit, thanks to price hikes and growing demand for tobacco alternatives.
Imperial's results come amid a series of regulatory hurdles in the industry.
The US is planning a ban on menthol cigarettes after decades of backlash from anti-smoking groups, while British Prime Minister Rishi Sunak is also planning to ban anyone aged 15 and under from buying cigarettes in the future.
After years of slow growth and losses in market share, Imperial outlined a turnaround plan in 2021 focusing on its five top markets and beefing up investments in next-generation products (NGP), which were deemed less harmful to health.
The maker of Winston cigarettes and Backwoods cigars has also been able to offset volume declines in cigarettes via price hikes.
First-Half Highlights
Adjusted operating profit grew 2.8% in constant currency to £1.67 billion ($2.10 billion) for the six months ended 31 March. Analysts in a company-compiled consensus had expected a profit of £1.678 billion.
Sales of Imperial's NGP brands, which include Pulze heated tobacco and blu e-cigarettes, were up 16.8%. The company also raised its interim dividend by 4% to 44.90 pence.
"Pricing actions in tobacco taken in the first half and good momentum in NGP gives us confidence in our ability to deliver full-year results in line with our guidance," CEO Stefan Bomhard said.
The company said its turnaround plan would result in further improvement to adjusted operating profit growth, supporting mid-single-digit percentage constant currency compound annual growth rate over the final two fiscal years of the plan.
Analyst Comment
According to Third Bridge analyst, Orwa Mohamad, the company faces a “significant risk due to inconsistent innovation, given the rapid influx of new products and market changes in the NGP sector. It took them four years to introduce Blu 2.0 and Pulze 2.0.”
“Our experts expect further flavour regulation in the market, particularly on nicotine pouches which will slow down growth but the category will still have significant growth potential globally,” Mohamad added.
News by Reuters, additional reporting by ESM.
