Cigarette maker Imperial Brands reported forecast-beating operating profit and said it expected another strong performance next year, as revenues from smoking alternatives soared 26%.
As well as higher sales of new products such as vapes or nicotine pouches, the maker of Winston cigarettes and Backwoods cigars has also offset falling tobacco volumes with rising prices.
It reported a 4.6% increase in adjusted operating profit for the year to 30 September, against analyst expectations for a 4.3% rise.
It said it expected operating profit to grow close to the middle of its mid-single-digit range again next year.
All cigarette companies are grappling with declining smoking rates in some markets, due to stricter regulation and growing awareness of health risks.
They are looking to grow revenues from alternative products to mitigate the impact, although these ventures are often loss-making as they build scale.
Performance Highlights
Imperial's brands, such as blu e-cigarettes and skruf nicotine pouches, saw a 26% increase in net revenue in constant currency terms, helping reduce the division's losses by 43% to £79 million ($100.07 million).
Adjusted operating profit from tobacco, which still makes up the bulk of Imperial's business, was up 2.5% thanks to higher prices.
Imperial already announced a full-year dividend for 2024 and a share buy back for 2025, which it said would boost shareholder returns to £2.8 billion in its new financial year.
The company said it was working on a new five-year strategy, and will provide details at a capital markets day in March.
Russ Mould, investment director at AJ Bell stated, “Despite a big push from governments, healthcare representatives and campaigners in society to curb the number of people smoking and vaping, Imperial Brands’ results would suggest the industry isn’t disappearing any time soon. The positive response to the results took its share price to a five-year high and extended the year-to-date gains to 35%.”
Stefan Bomhard, chief executive officer of Imperial Brands, added, “As we enter the final year of our current strategy, the investment we have made in consumer capabilities, cultural transformation and agile ways of working has supported another year of accelerated financial delivery and growing capital returns.
“These results demonstrate how we are fulfilling our role as an effective challenger for the industry, able to deliver consistently against operational and financial expectations.”
News by Reuters, additional reporting by ESM.
