Moody's Investors Service has issued a 'stable' outlook for the global tobacco sector, saying that the long-term impact of coronavirus on consumption is 'too early to gauge, but unlikely to be meaningful'.
Moody's expects the tobacco sector to return to profit growth of between 5% and 10% after a decline this year, noting that combustible volumes are likely to decline faster in the US than in other markets.
Lower sales volumes are likely to be offset by price rises, while alternative product sales are likely to 'accelerate' due to more regulatory scrutiny of traditional combustible products, according to Moody's.
It added that the major firms in the sector, such as BAT and Imperial Brands, will continue to pay large dividends over the next two years.
Influencing Factors
Factors that could change the outlook to negative include a contracting of operating profit forecasts; setbacks to alternative tobacco product development, and a deterioration in the regulatory and litigation environment.
Factors that could change the outlook to positive, meanwhile, include operating profit growth of more than 6%; 'significant' revenue contribution from alternative products; and an improved regulatory and litigation environment.
© 2020 European Supermarket Magazine – your source for the latest retail news. Article by Stephen Wynne-Jones Click subscribe to sign up to ESM: The European Supermarket Magazine
