Imperial Tobacco beats forecasts - but bemoans its lot

There can't be many harder industries to be in than tobacco - though it shouldn't expect much sympathy...

Last Updated: 31 Aug 2010

It’s been a good six months for Imperial Tobacco, the world’s fourth-biggest fag peddler. The UK-based firm reported an 8% rise in half-year revenues, with profits up 4% to £1.2bn – both of which were ahead of City expectations. It hasn’t escaped the impact of the recession entirely, but cash-strapped smokers seem to be opting for rollies instead: Imperial’s loose tobacco sales were up nearly 10%, offsetting a 4% drop in cigarette sales. But with taxes still rising and legislation getting ever more stringent, its outlook remains mixed, to say the least. We don’t envy its lobbyists…

CEO Gareth Davis – who’s about to step down, to be replaced by current COO Alison Cooper (let’s face it, Imperial needs all the positive PR it can get) – said Imperial had ‘demonstrated the resilience of our business and the success of our enhanced sales strategy’ in the first half; it was, he said, ‘an excellent performance in a challenging environment’. Cost savings are apparently progressing well, and the Davidoff, Gauloises Blondes and West cigarette brands are all increasing sales, particularly in Africa, the Middle East, Asia and Central Europe. Good for Imperial and its shareholders, though a bit depressing if you’re not a smoking fan.

But as usual with Imperial results – and despite this being Davis’s swansong – much of the talk was about the tax and regulatory environment. The ever-increasing taxes on cigarettes have affected sales, while Imperial is also lobbying hard against a Government plan to ban product displays in shops (the theory being this will stop young people buying them). Davis said he recognised Imperial had a ‘controversial product' and wasn’t against ‘sensible, reasonable and practical regulation’. But, he said: ‘We strongly oppose regulation that undermines the rights of our consumers to enjoy smoking and our commercial freedoms such as product display bans.’

While we’ve no intention of losing any sleep over the travails of cigarette makers (and remain unconvinced that further crackdowns will just fuel illicit trade, as Davis suggests), we can’t imagine many kids buy cigarettes because the product displays look so tempting. What’s more, we don’t quite see how the Government can pick out a particular industry and change the law just to target them. Since the Tories have also been making noises about the legality of the proposed new rules, we can guess who Davis, Cooper and Imperial want to win the Election…

In today's bulletin:

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Imperial Tobacco beats forecasts - but bemoans its lot
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