Bloomberg News

Imperial Tobacco Earnings Gain on Prices, Emerging Markets

November 01, 2011

(Updates with capital expenditure forecast in 10th paragraph.)

Nov. 1 (Bloomberg) -- Imperial Tobacco Group Plc said full- year earnings rose 1.2 percent and boosted its dividend as the maker of Davidoff cigarettes raised prices in Germany and increased sales to smokers in eastern Europe and Asia.

Adjusted operating profit in the 12 months ended Sept. 30 climbed to 3.1 billion pounds ($5 billion) from 3.07 billion pounds a year earlier, the Bristol, England-based company said today in a statement. That compared with the 3.11 billion-pound average estimate of 12 analysts surveyed by Bloomberg. Tobacco revenue rose 1.8 percent to 6.91 billion pounds.

Imperial Tobacco is getting more business from emerging markets such as Russia and Vietnam, tempering the impact of lower consumption in Spain and North America. Price increases also contributed to growth and will boost profit again in the new fiscal year, said Chief Executive Officer Alison Cooper.

“The emerging markets are the key driver of profit growth and that’s offsetting declines in Spain,” said Erik Bloomquist, an analyst at Berenberg Bank in London.

The Spanish market is “more stable” as prices have recovered, the company said, though it still expects “some decline” in the country next year.

Imperial Tobacco fell 0.4 percent to 2,265 pence at 10:55 a.m. in London trading, the third-best performer in the U.K. benchmark FTSE 100 Index, which slid 2.9 percent.

Share Buybacks

The total volume of tobacco sold by Imperial Tobacco during the year fell 1.5 percent, compared with the average analyst estimate for a 1.6 percent decline and less than the company’s September projection of a 2 percent fall.

Total shipments of the Davidoff, Gauloises Blondes, West and JPS brands gained 4 percent.

Spending on share buybacks during the year was 182 million pounds, the company said. Imperial Tobacco said in May it would repurchase 500 million pounds of shares a year. The open-ended buyback program was the first announced since the company said it would halt repurchases in 2007 and bought Commonwealth Brands, a U.S. cigarette maker, and Altadis SA in Spain.

Imperial Tobacco anticipates capital spending next year of 350 million pounds to 400 million pounds, according to Cooper. The company also expects to introduce its next new product in 2012, she said, without providing details.

Imperial Tobacco may make further acquisitions if the potential purchases meet strategic criteria, Cooper said. Finance Director Bob Dyrbus said in May that the company has “scope” for acquisitions. Purchases will be smaller than in the past, he said at the time. Imperial paid 15.5 billion euros for Altadis and $1.9 billion for Commonwealth Brands.

Dividends will rise more than adjusted earnings per share in coming years, with 50 percent of profit being paid out as dividends this fiscal year, Dyrbus also said in May. The full- year dividend was raised 13 percent to 95.1 pence a share, or 50.6 percent of earnings, the company said today.

--Editors: Paul Jarvis, Tom Mulier.

To contact the reporter on this story: Dermot Doherty in Geneva at ddoherty9@bloomberg.net

To contact the editor responsible for this story: Celeste Perri at cperri@bloomberg.net


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