Imperial smokes out a strong profit
Imperial Tobacco posted an 11 per cent rise in pre-tax profit yesterday on the back of strong sales in its core British and German markets.
The Bristol-based company, whose brands include Lambert & Butler and Richmond cigarettes, saw profits come in at the top end of analyst expectations at £1.1bn. Sales increased 4 per cent to £3.1bn.
Imperial, which also produces upmarket brands West and Davidoff, which are popular in Germany, said its productivity rose 15 per cent as it produced 175bn cigarettes this year.
Chief executive Gareth Davis said: “These are an excellent set of results. Our core markets in Britain and Germany delivered significant improvements in profits, against a background of market declines.”
The world’s fourth biggest tobacco company, which now focuses on budget brands, said it had increased sales in mature markets and in developing markets in Eastern and Central Europe.
Davis said the business had amassed £450m of cash which, he said, will be returned to shareholders if the company fails to find suitable acquisitions. He added that he expected the valuations of listed rival tobacco companies to remain too high to make sensible acquisitions over the next two years.
Davis said: “Further industry consolidation is inevitable at some stage, but at the moment there appears to be nothing on the horizon and we are looking at some bolt-on opportunities.”
Last year Imperial returned £200m to investors. Davis, an ardent smoker, expected Britain’s smoking ban proposed for 2007, to have little impact on Imperial’s business. He explained: “In countries where this ban already exists, we see an initial dip before consumption returns over a few months to pre-ban levels.”
Imperial’s Lambert & Butler and Richmond brands account for more than 30 per cent of the British market.
The company has reduced operating costs significantly in recent years by cutting staff and over the last year has closed factories in Ireland, Canada and Wales. Imperial said its full year dividend would be 56p, a 12 per cent rise.
The company saw some profit taking as its share price fell 5p to £16.15 yesterday.