Imperial Brands Expects Net Revenue Growth in Low Single Digits

On April 13th, tobacco and e-cigarette manufacturer Imperial Brands announced that it is steadily working towards meeting its full-year expectations and anticipates achieving low single-digit net revenue growth. Over the next three years, the company expects its operating profit growth to accelerate, reaching a median compound annual growth rate.

The announcement highlights its main core features in five key points.

The company maintained a strong market share and stable tobacco pricing in five major combustible tobacco markets. The launch of new products such as e-cigarettes, heated tobacco, and modern oral products also contributed to the growth of net income. Despite the impact of COVID-19, the group's adjusted operating profit in the first half of the year remained unchanged from the same period last year, reflecting the effects of COVID-19 on cigarette sales, increased investment in new products, and the impact of exiting the Russian market last year. The company is expected to achieve revenue and profit growth in line with expectations and guidance for the full year. They have completed £523 million of their £1 billion share buyback program for the fiscal year 2023, which represents approximately 2.7% of the issued share capital.

Combustible tobacco market.

Imperial Tobacco is predicting that their market share in the five major markets will remain steady or increase compared to the same period last year in the first half of this year. Although their market share in Germany and the UK is expected to decline, the market share in the US, Spain, and Australia is expected to remain stable or grow, offsetting the decline in those two countries. The company has maintained a strict pricing system in these five major markets.

New tobacco market.

Imperial Tobacco has made progress in the development and launch of new tobacco products. In the e-cigarette market, they have introduced the blu 2.0 product in the UK, Spain, France, Czech Republic, and Portugal.

Due to the strong growth in Europe, it is expected that revenue from new tobacco products will exceed that of the same period last year in the first half of the year. This is enough to offset the decline caused by the uncertainty from the US marketing ban.

Central and Eastern Europe have been integrated into the AAA region, creating the AAACE region.

Imperial Tobacco is transferring the management of its Central and Eastern Europe (CEE) cluster from Europe to the African, Asian, and Australian (AAA) region. The AAA region will now be referred to as AAACE.

The markets that have been affected by the transfer of regional management this time include Poland, the Czech Republic, Ukraine, Slovakia, Hungary, Azerbaijan, Armenia, Georgia, Moldova, Croatia, and Slovenia.

In the half-year restatement report ending on March 31, 2023, Imperial Tobacco reported a total revenue of £1.37 billion in the New Europe region and £965 million in the AAACE region.

The primary source of revenue for the new tobacco industry is Europe. The revenue generated by the new tobacco industry in the New Europe region is worth £74 million, while the Old Europe region generates £77 million worth of revenue. The new tobacco industry in Europe accounts for 5.4% of total revenue.

Note: The original amount of 1.569 billion pounds for Europe minus 199 million pounds for the Central and Eastern European (CEE) region equals the new amount of 1.37 billion pounds for the expanded European region.

The total amount of 965 million pounds was obtained by combining 766 million pounds from the AAA region and 199 million pounds from the CEE region in the AAACE region.

Imperial Brands PLC has published a report according to an announcement made by the company.

The mid-year performance report covering the period ending March 31, 2023, will be released to the public on May 16, 2023.

Reference:

Imperial Brands is expected to meet full-year guidance based on the pre-close trading update.