Imperial Brands Abandons Profit Forecast on Unsold Vapes

(Bloomberg) --

Imperial Brands Plc, the maker of Kool cigarettes, abandoned its forecast for earnings growth this year as a U.S. ban on some vaping flavors leads to a drop in sales of smoking alternatives.

Adjusted earnings per share will drop about 10% at constant currency in the first half, the company said ahead of its annual meeting with shareholders Wednesday. Imperial said it expects a slight drop in full-year profit, giving up a target for low single-digit growth. The stock fell as much as 5.5%.

Revenue from e-cigarettes and other smoking alternatives is set to decline significantly as the U.S. Food & Drug Administration bans certain vaping products as of Thursday, Imperial said. Demand for vaping products has also been dented by concern about safety after a spate of illness in the U.S. that’s largely been linked to products containing THC.

Monday, the company named Stefan Bomhard, who leads U.K. luxury car distributor Inchcape Plc, to become its chief executive officer to replace Alison Cooper, who ran the cigarette maker for the past decade.

Read more: Some Vaping Flavors Banned as FDA Seeks to Curb Teen Use

Despite cost cuts, Imperial expects a net 40 million-pound ($52 million) reduction to profit due to the drop in demand this fiscal year, which ends in September. Tobacco companies have cut prices of vaping starter kits to as little as $1 in the U.S. in recent months in a fight to gain market share.

The company said it’s writing down the value of flavored vaping product inventory, which will reduce earnings by a further 45 million pounds. The company has been offering deals such as 15 free Myblu flavored liquid pods for every 10 bought online in a last-minute sale in the U.S.

What Bloomberg Intelligence Says:

“Full-year expectations depend on a significant 2H recovery, which may depend on how global regulation develops.”

-- Duncan Fox, BI consumer goods analyst

Imperial Brands’ New CEO Has Tough Decisions to Make: React

Imperial also said it’s still in negotiations to sell its premium cigar business. The company has been considering selling other assets as well.

Michael R. Bloomberg, founder and majority owner of Bloomberg News parent Bloomberg LP, has campaigned and given money in support of a nationwide ban on flavored e-cigarettes and tobacco.

©2020 Bloomberg L.P.

BQ Install

Bloomberg Quint

Add BloombergQuint App to Home screen.