Imperial tobacco volume down 23 billion

Imperial Tobacco’s volume shipments of cigarettes and other tobacco products calculated as ‘stick equivalents’ (SE) during the 12 months to the end of September, at 294 billion, were down by seven percent on those of the 12 months to the end of September 2013, 317 billion.

The company said that the underlying fall in shipments, which excludes the impact of a stock optimization program that reduced trade inventories in a number of markets, was four percent.

And it said that underlying shipments of its Growth Brands were up by seven percent, driven by organic growth and brand migrations.

In its preliminary results, issued today, Imperial said that it had made significant progress in the year to the end of September, implementing a stock optimization program, managing its cost base and controlling its cash flows.

The stock program, which was now completed, had reduced trade inventories in some of the company’s major markets, affecting volumes by about nine billion SE.

Results had been affected also by market size declines.

But strong price/mix and cost control initiatives had mitigated some of these impacts.

‘Underlying revenue and volume results remove the impact of the stock program and give a clearer picture of how well we performed,’ the company said.

‘Total adjusted operating profit was stable at £3 billion. Underlying tobacco net revenue was up by two per cent.

‘The proportion of net revenue from our Growth Brands increased, improving the quality of our revenue and strengthening our sustainability.’

Meanwhile, Imperial reported that in Sweden and Norway it had enjoyed an ‘excellent performance’ from its Skruf brand that was behind ‘another set of strong results’ from its snus business, with share, volume, revenue and profit all increasing.

And it reported that, during the 12 months under review, it had entered the Egyptian market where it was concentrating on establishing its presence with Davidoff and Gauloises Blondes.

In July it had agreed to invest $7.1 billion (£4.2 billion) to acquire from US-based Reynolds American a number of assets that were being sold as a result of the acquisition of Lorillard by Reynolds.

The assets included a portfolio of US cigarette brands and blu, the number one electronic cigarette brand in the US.

The cigarette brands were being acquired without historic product liabilities.

Meanwhile, Imperial’s stand-alone, non-tobacco subsidiary, Fontem Ventures, had launched the Puritane electronic cigarette brand in the UK in February.

Fontem was focused also on expanding its presence across Europe with a ‘second e-vapour product’, though earlier expansion plans had been revised after Imperial had agreed to buy blu, which was sold in the UK.

Fontem continued to assess other potential product launches, in a variety of non-tobacco lifestyle consumer categories, while further developing and licensing its patented technologies.

“This has been a year of significant delivery by Imperial,” said chief executive, Alison Cooper.

“We’ve strengthened our brands and market footprint, improved cash conversion to 91 percent, reduced debt by £1 billion and delivered another 10 percent dividend increase to shareholders.

“We’ve completed our stock optimization program and realized over £60 million of further savings through our cost optimization program.

“We’ve achieved what we set out to achieve, creating a stronger business in the process.

“Trading conditions remain tough in many territories but the actions we’ve taken to enhance the quality and sustainability of the business have put us in a stronger position to drive growth and create sustainable value for our shareholders.”