Imperial Tobacco beats profit expectations

Cigarette producer Imperial Tobacco has beaten market expectations both in terms of operating profits and earnings per share in its first half as the its biggest brand, Gauloises Blondes, produced significant growth.

In the six months to the end of March, Imperial's adjusted operating profit came in at £1.524bn against a market consensus forecast of £1.520bn. Earnings per share was 93.1p against the consensus estimate of 92.7p.

One black spot for Imperial has been a drop in the volume of sales of both cigarettes and fine cut tobacco. This is measured in "stick equivalents" (a stick is the industry jargon for a cigarette). Stick equivalents over the six months were 159.1bn, a 4.1% drop on the same period of last year.

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The company admits its first quarter was "challenging" not least because of the economic problems in Spain where net revenue declined by 4% to £239m and adjusted operating profit was down by 2% to £106m.

While investors may be concerned at this fall, they will be more cheered by the interim dividend, which has been announced at 31.7p, a near 13% rise on the prior year.

Sales of Imperial's "key strategic brands" (Davidoff, Gauloises Blondes, JPS and West) were up 5%, with net revenue increasing 12%. The most impressive performer was the largest of the four, Gauloises Blondes, which grew 11% on the back of a big boost in sales in the Middle East and North Africa.

Imperial's Chief Executive, Alison Cooper, said of the results: "I'm pleased with the ongoing success of our key strategic brands ... as well as the recent cigarette and fine cut tobacco share progress we've made in both the EU and emerging markets."

BS