Imperial Brands PLC (LON:IMB)’s underlying revenue is expected to grow at 1% driven by strong tobacco pricing. Together with reduced losses in Next Generation Products (NGP) and improved performance in Distribution, this should feed into underlying operating profit growth in the low to mid-single digits, as expected.
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CEO Stefan Bomhard said, “We have made good progress in implementing our strategy through a sharper management focus, greater investment behind our priority combustible tobacco markets and new market trials in heated tobacco and vapour.”
The shares fell 1.4% following the announcement.
Imperial's Focus On Quality
Laura Hoy, Equity Analyst at Hargreaves Lansdown:
“Imperial’s pressing forward with its strategy to focus on quality rather than quantity when it comes to its global footprint. This is a key part of being a tobacco company these days—with the number of smokers dwindling, the only lever to pull is hiking prices. Having a commanding market share and recognisable brand name is paramount.
Aside from a shrinking addressable market, Imperial’s combustibles business is battling against loosening travel restrictions which are funnelling some customers away from more expensive product offerings. Add to that declining revenue in Australia and a £50m legal bill in the US, and it’s a recipe for profit declines. On the bright side, improved performance in Next Generation Products (NGP) and Distribution should make up for this, with group underlying profit ultimately expected to rise.
Combustibles is still the growth engine for Imperial—but NGPs is ultimately the future. So far it’s had a lukewarm reception, but management’s managed to trim some of the fat by exiting less profitable markets. While the second half will still show the impact of these abandoned markets, a narrowed focus should help the group build out more successful cigarette-alternatives.”
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