Tuesday, May 17, 2022, was a big day for Imperial Brands as they emerged strongly after a half-year performance as next-gen product sales help make up for lower tobacco volumes. The Rizla-maker said it was delighted with its performance in the first half of its financial year, as it was able to increase its interim dividend though the profit went down drastically.
Losses were also experienced by the FTSE tobacco group, which makes Gauloises. West cigarettes was in the same dilemma, also experiencing losses in its e-cigarettes business while demand for heated tobacco products and e-cigarettes grew. In the six months to 31 March, returns grew 0.3% to £3.5bn, and are set to keep increasing in the coming years.
Tobacco profits went up 0.1% as higher prices were able to offset a 0.7% decline in volumes. The next-generation sales products, which include blu vapes and Pulze heated tobacco, saw an 8.7% rise to £101m ($129m), driven by a resilient performance in Europe.
The CEO Stefan Bomhard also commented that there is a piece of strong evidence after receiving the results that the core combustible business has become steady. He also said that during the first half of the year, the aggregate market share in the five priority markets which account for around 70% of our operating profit increased, while upholding pricing discipline.
Its core markets in Germany, the UK, Spain US, and Australia account for over 70% of the firm’s returns. The tobacco giant was the biggest riser on London’s blue-chip index as shares rose to 6.9% as a result of the Tuesday morning update. The results really boosted the company’s shares to a more than two-year high.
Susannah Streeter senior investment and markets analyst at Hargreaves Lansdowne) noted that the Investors seemed reassured that the firm was back on the right path to hit the year guidance figures, as its earnings in its five-year strategy to shift to tobacco alternatives. It was also reported net debt was reduced by £1.2bn (12-month basis), driven by free cash flow
The board announced an interim dividend of 42.54p, 1% higher than last year. At times last year, it felt like investors were going to ditch their tobacco habit completely as ESG considerations were at the fore. However, Russ Mould, investor director at AJ Bell, said the cigarette manufacturers were proving hard to stub out in a situation where their pricing power and resilient demand provided a useful hedge against price rises.
