Imperial Brands "on track" but cigarette packaging changes and end of Philip Morris International distribution agreement take their toll

Francesca Washtell
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EU and domestic regulations have cracked down on cigarette packaging this year (Source: Getty)

Big Four tobacco group Imperial Brands is on track to meet its full-year expectations but has taken a hit from new packaging regulations and the termination of a distribution agreement with Philip Morris.

The Winston and Gauloises maker is set to make £7.16bn in total tobacco revenue and total group adjusted profit of £3.51bn. This will be a 15 per cent year-on-year rise in both revenue and overall profit.

Imperial said it had delivered “strong growth” in growth markets and had made good progress on its cost-cutting programme in a trading update today.

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However, in established markets, particularly the UK, benefits from price increases have been offset by the cost of changing its cigarette packaging across Europe to adhere to the European Union’s Tobacco Products Directive (TPD) and additional laws in Britain that now also require plain cigarette packaging.

Under the TPD, which was introduced in May, cigarettes sold in all EU countries must be in packages that are comprised of 65 per cent health warnings.

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In the UK, also since May, in addition to health warnings cigarette packets now have to be a uniform green colour and keep brand advertising to a minimum.

Pricing benefits were also offset by the termination of a distribution agreement with fellow tobacco major Philip Morris International (PMI).

Imperial historically distributed the Marlboro maker’s cigarettes in the UK and Morocco, but PMI has since taken over its own distribution.