Imperial volumes drag in the first quarter - UPDATE

Imperial Tobacco has seen reported stick equivalent volumes fall 7% in the three months to December 31st, due to the trading difficulties in Syria, Spain, USA and Ukraine.

Syria accounted for 3% of the volume decline due to the ongoing impact of international sanction compliance there, while the rate of the volume decrease in Spain was in double-digits. Meanwhile, a further 3% of the overall fall in volumes relates to trade stock levels around a price increase in the USA and distributor destocking in Ukraine.

Tobacco net revenues fell by 1% in the first quarter but the group says that its overall financial position and operational performance remains in line with full-year expectations.

Subscribe to MoneyWeek

Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Get 6 issues free

Sign up to Money Morning

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Sign up

On an underlying basis, which excludes the impacts of the countries mentioned above, stick equivalent volumes fell by just 1% and tobacco net revenues rose 3% reflecting strengthening price/mix, the firm said.

"Delivering the planned acceleration in our underlying sales momentum whilst continuing to realise cost and cash opportunities remain our priorities such that we are well placed to create further value for our shareholders this year," said Chief Executive Alison Cooper.

EU trading is said to be going well, with strong positions in cigarette and fine cut tobacco being maintained in the UK and Germany. In Spain, Imperial expects the rate of volume decline to ease in the remainder of the year.

However, the company said that it has given up market share in some markets "in order to further build our long term category margins through price optimisation."

In non-EU trading, the group highlights its performance in the key emerging markets of Asia-Pacific, Africa and the Middle-East as delivering good growth.

Meanwhile, the Logistics business has experienced a challenging operating environment, Imperial said.

BC