Promotions and brand extensions ensured solid performance of Imperial Tobacco’s key tobacco brands and helped the company record an 8 percent increase in year-over-year earnings per share.
The fourth-leading cigarette maker in the world has concentrated efforts on low-cost brands, such as West, Lambert & Butler, Classic and JPS as well as roll-your-own tobaccos.
In addition, the company has also lifted prices of its upmarket brands for wealthy customers, mainly from Western Europe, Canada and the United States.
Following the steps of its major rivals, British American Tobacco and Philip Morris, the group is expending its presence in developing markets seeking to offset shrinking sales in many of its key developed markets.
“We see considerable opportunities for development in emerging markets, covering the countries of Eastern Europe, Asia, African and the Middle East, and we intend to continue investing in these regions to support longstanding growth,” the U.K.-based cigarette maker declared in a note to shareholders.
Imperial Tobacco’s net revenue from its tobacco brands added 4 percent to equal £7 billion. Its key global cigarette brands – premium Davidoff, mid-cost Gauloises Blondes and discount West and JPS – secured a 7 percent growth in volume, with revenues growing by 13%. The key four brands represent nearly 30 percent of total volume for Imperial Tobacco.
Imperial’s adjusted operating profit grew 4 percent to reach roughly £3.1 billion. At the same time, overall volume of its cigarette and fine-cut tobacco brands lost 2.7 percent during the fiscal year, ending September 30 due to tough market conditions in Poland and Ukraine, and international trade embargo in Syria.
Overall, Imperial Tobacco sold nearly 340 billion cigarettes in the given period.
The company recorded an 8 percent growth in adjusted yearly earnings, which equaled 201 pence per share. The annual dividend grew 11 percent to 105.6 pence per share, improving its payout ratio to 52.5 percent.
In Germany and the United Kingdom – its leading markets – net revenues grew by 3 percent and 8 percent respectively driven by new product introductions, while revenues added 10 percent in the rest of the world cluster, thanks to strong demand for its super-premium Cuban cigars and premium cigarette brands in Russia and Turkey, and a solid performance in Asian countries.
In Spanish market, where growing unemployment rates and stringent austerity laws have affected the market, the group declared it used a non-cash impairment charge of £1.2 billion within the year due to difficult macroeconomic situation in the region.
Revenue across the Americas region, covering Canada, Latin American countries and the U.S., Imperial’s major market in the region, dropped 11.4 percent, however, the company said the results were improving in the final quarters of the year.