Imperial Brands Forecasts Return to Profit Growth This Year

Imperial Brands Plc forecast a return to profit growth this fiscal year as tobacco prices remain strong and its vaping business reduces its losses.

  • Operating profit should rise at a low- to mid-single-digit percentage growth rate on an adjusted and organic basis in the 12 months through September 2021, the maker of West cigarettes said. Adjusted operating profit fell 4.8% in the most recent fiscal year, in line with analysts’ estimates.

Key Insights

  • The ability to raise prices on tobacco is helping Imperial navigate the pandemic. The maker of Kool cigarettes raised prices by 6.7%, especially in the U.S., Australia, Germany and the U.K. Still, some shifts by smokers to cheaper products means the net impact was a 3.9% boost.
  • The maker of Blu vaping products will need to find ways to revive sales of its cigarette alternatives -- seen broadly as key future growth drivers -- after revenue in that category slumped 27%, falling further behind larger competitors. Imperial managed to reduce the loss a bit in the second half, but reaching break-even will take more time.
  • New Chief Executive Officer Stefan Bomhard is conducting a strategic review and plans to update investors on his plans to revive the tobacco and smoking substitute businesses on Jan. 27.

Market Reaction

  • The shares fell 2% as of 8:01 a.m. London time Tuesday. They have gained 3.4% in the past month.

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