By Eva Mathews
(Reuters) -Imperial Brands is betting on higher cigarette prices and strong demand for tobacco alternatives over the next six months, after a rise in first-half profit at the maker of Winston cigarettes and Backwoods cigars.
After years of slow growth and market share losses, Imperial outlined a turnaround plan in 2021 focusing on its five top markets and beefing up investments in next-generation products (NGP) deemed less harmful to health.
Sales of Imperial’s NGP brands, which include Pulze heated tobacco and blu e-cigarettes, were up 19.8% in constant currencies, it said in a statement on Tuesday.
Its adjusted operating profit was up 0.8% to 1.6 billion pounds ($2 billion) on a revenue rise of 0.3% to 15.41 billion pounds for the six months to March 31.
“Imperial’s current strategy is akin to rolling out ‘me too’ type products across a range of European markets – but losses are increasing again.
This will need to shift to strong sales or proper innovation if it is to have appeal over the long-term,” said Chris Beckett, head of equity research at Quilter Cheviot.
The United States, Britain, Germany, Spain and Australia are the biggest markets for revenue at Imperial, which maintained its full-year outlook for adjusted operating profit.
Imperial’s results were largely in line with expectations after an update last month that flagged the impact of its Russia exit and a cooling off in demand from COVID-19 pandemic highs, with little change in its share price on Tuesday.
“We expect the year-on-year effect of consumer buying patterns to normalise in the second half,” Imperial said in a statement, adding that cost inflation, a stronger dollar and increased NGP investments remained an overhang.
“This (the second half) will be a truer test of how resilient smokers remain to price rises,” said Hargreaves Lansdown analyst Derren Nathan.
($1 = 0.7923 pounds)
(Reporting by Eva Mathews in Bengaluru; Additional reporting by Yadarisa Shabong; Editing by Uttaresh Venkateshwaran and Alexander Smith)
