- Shares at two-year highs
- Gaining market share despite price rises
- £201 million one-off Russia costs
Shares in tobacco and new-generation product maker Imperial Brands (IMB) leapt to the top of the FTSE 100 leader board gaining 7.8% to a post-pandemic high of £18.46.
This was despite the firm posting a 26% drop in first half operating profits due partly to the cost of exiting the Russian market.
SOLID FIRST HALF
Group net revenues for the six months to the end of March were down 1.3% to £15.36 billion, but on a positive note the firm increased its market share in ‘combustibles’ in three of the five priority markets which make up around 70% of operating profits.
Volumes were only down 0.7%, thanks to market share gains in the US, Australia and the Middle East, while the firm pushed through a 3.8% price hike in the second quarter which improved the sales mix.
However, the highlight for investors was new-generation products including vapes, heated tobacco and oral tobacco where first half sales jumped 8.7% to £101 million.
While revenues from the business are still relatively small, the business needs less investment than it did to start with meaning losses are reducing.
SHIFTING LANDSCAPE
Operating profits were impacted by the non-recurrence of capital gains and a £201 million charge for transferring its Russian business to local investors and exiting the market.
The firm was clear that the sale was permanent and there was no clause allowing it to buy the business back in the future.
Imperial’s Russian business only accounted for around 1.5% of revenues and 0.2% of operating profits last year so the long-term impact of quitting the country is minimal.
Meanwhile, rival Philip Morris’s (PM:NYSE) $16 billion bid for Scandinavian snus and oral tobacco maker Swedish Match (SWMA:STO) has highlighted the growing attraction of alternative products to traditional cigarettes.
Swedish Match is one of the world’s leading producers of snus, nicotine pouches and chewing tobacco as well as manufacturing smoking accessories such as matches and lighters.
