Illicit cigarettes stunt Imperial Tobacco growth

THE RISING black market for cigarettes in Europe has hit profits at Imperial Tobacco, the FTSE 100 giant said yesterday.

Imperial said that sales of cigarettes in the EU are currently around five per cent lower than last year, as rising prices and squeezed budgets meant more people buying illegal cigarettes.

“Given our ongoing investment and the European market pressures we expect first half adjusted operating profit to be down year-on-year,” the company said.

The profit warning sent shares in Imperial down by almost five per cent yesterday. Fellow FTSE 100 tobacco stock British American Tobacco dropped by almost one per cent.

“This reinforces the importance of our two focus areas for 2013: further investing behind our key total tobacco assets and geographies; and accelerating our cost optimisation programme,” Imperial’s chief executive Alison Cooper said.

The company said that in the last three months of 2012, revenues rose by two per cent even as volume sales fell slightly. It said the firm’s “key strategic brands” – Davidoff, Gauloises, West and JPS – saw revenues increase by 12 per cent.

In Australia – where cigarettes have been sold in plain, olive coloured packaging since 1 December – Imperial claimed to have seen “no significant change in consumption trends” in the country.

Despite Imperial’s troubles, analysts were bullish on the stock yesterday, claiming it remains underpriced.

Yesterday, the company also announced that finance director Bob Dyrbus, who has been with the company for 25 years – would retire.