Imperial Brands shares rise despite falling profits after Russia exit as e-cigarettes boost Golden Virginia owner

  • Imperial Brands saw half-year profits fall by more than £800m to £1.04bn
  • Reported income also fell slightly due to lower excise duties in Europe
  • Shares of the company topped the FTSE 100 index this morning

Imperial Brands’ profits plunged after the cigarette maker opted out of the Russian market.

But shares of Imperial Brands soared 7.2% to £18.36 in early trading as the owner of the Rizla and Golden Virginia brands said it was on track to meet its targets for the year complete.

At constant exchange rates, net sales are expected to grow by around 0-1% this year, partly due to higher prices, while adjusted operating income is expected to grow by around 1%.

Plunge: Revenue at the multinational tobacco company, which owns vaping product blu, fell by more than £800million to £1.04billion in the six months to March 31

This despite profits from the multinational tobacco company, which also owns Gauloises and vaping product blu, which fell from more than £800m to £1.04bn in the six months to March 31 .

About a quarter of the drop in profitability stems from exit costs related to the Bristol-based company’s departure from Russia following the large-scale invasion of Ukraine in late February.

In early March, it suspended all operations in the country, including all marketing and sales activities and production at its Volgograd factory, before handing them over to local investors four weeks ago.

The action also contributed significantly to the company’s FTSE 100 operating profit falling by more than a quarter to £1.2bn.

However, Imperial Brands suffered a much bigger financial hit due to non-recurring gains on the sale of its premium cigar business, which included a 50% stake in Cuban cigar maker Habanos, for 1 £.1 billion two years ago.

It was further affected by a slight decline in reported revenues due to lower excise duties in Europe, although net revenues increased slightly due to higher tobacco prices and increased demand for products. Next Generation (NGP).

Cigar sales: Imperial Brands took a hit from non-recurring gains on the sale of its premium cigar business, which included a 50% stake in Cuban cigar maker Habanos

Cigar sales: Imperial Brands took a hit from non-recurring gains on the sale of its premium cigar business, which included a 50% stake in Cuban cigar maker Habanos

As part of its five-year strategy, the group is placing greater emphasis on driving demand for modern, heated oral and vaping products and growing market share in its top five primary fuel territories.

These territories are the UK, US, Australia, Germany and Spain, and are responsible for around 70% of the company’s operating profit.

During the first half of the financial year, Imperial Brands said its market share had weakened in the latter two markets, although this was more than offset by expansion in the United Kingdom, the United States and in Australia.

Meanwhile, the group noted positive feedback from trials of its Pulze heated tobacco system in Greece and the Czech Republic, and vaping brand Blu in North Carolina.

Chief Executive Stefan Bomhard said that 18 months after the strategy was launched, he was “satisfied with the progress we are making”.

He added: “Our focus for the remainder of 2022 will be to further invest in our five priority markets and begin rolling out our NGP strategy.

“Although we are going through uncertain times, as we approach 2023, we will have the capabilities and culture to support the next phase of our strategy and deliver sustainable growth in shareholder value.”

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