Imperial Tobacco UK sales hurt by downturn

Sales of cigarettes fall across Western Europe as the recession and long-term declines in smoking affect business

Catherine Boyle

Cigarette sales have fallen in the UK and the rest of Western Europe as consumer spending declines, according to Imperial Tobacco, which published interim results this morning.

The world’s fourth-largest cigarette maker reported a 14 per cent rise in adjusted half-year earnings per share to 71.8p today and said that it was well placed for the future. However, its share price fell by 4 per cent in early trade as the company made a net loss of £149 million, compared with net profit of £233 million in the same period last year, as it integrated Altadis, the Franco-Spanish maker of Gauloises cigarettes, which it bought in January 2008.

Adjusted profit from operations rose by 49 per cent to £1.37 billion, but the comparative period last year included only two months of Altadis's sales instead of six months this time. Imperial said today that it remains on track to deliver planned cost savings from the purchase.

Although cigarette sales fell across Western Europe, with the UK market down 2 per cent and the Spanish market shrinking by 5 per cent, a strong performance in Africa and the Middle East helped buoy volumes.

The cigarette maker also benefited from the weaker pound when translating overseas earnings.

Imperial, which makes Richmond and Lambert & Butler, the two most popular cigarette brands in the UK, said that cigarette volumes rose by 25 per cent to 152 billion around the world, while volumes of fine-cut tobacco rose by 4 per cent to 12,150 tonnes as smokers changed to rolling their own cigarettes to reduce costs.

Gareth Davis, chief executive of Imperial, said: “We are not immune from the pressures of the external environment but our enhanced business profile, combined with our ongoing focus on cost and cash management, leave us well placed to continue to create sustainable value for our shareholders.

"About half our portfolio is value brands and they've done particularly well taking advantage of the ongoing trend to down-trading, particularly in mature markets."