By Jack Denton
Imperial Brands has seen a “good start” to the year in line with the tobacco giant’s expectations, as the maker of Winston and Backwoods turns to reducing losses in its vaping business.
Shares in the group, which also owns brands including John Player, Gauloises, Golden Virginia, and Rizla, fell 1% on Tuesday following the trading update from the company, a constituent of London’s FTSE 100 index.
Imperial Brands /zigman2/quotes/208789104/delayed UK:IMB +0.63% said that its performance has been largely in line with projections, and that the group expects to deliver full-year adjusted earnings in the low-mid single digits, at constant currency rates. Net revenue is expected to grow at least 1% in the first half of the year, the group said, helped by strong tobacco prices and growing revenues in its next-generation products (NGP) business, which includes vaping.
“To counteract the shrinking pool of smokers, Imperial has been working to squeeze more dollars out of its existing customers. Luckily, tobacco offers exceptional pricing power which makes that job a bit easier, but it doesn’t afford Imperial the opportunity to rest on its laurels,” said Laura Hoy, an analyst at Hargreaves Lansdown.
The tobacco giant said that it has started to achieve aggregate market share growth in its five key markets, with gains in the U.S., U.K. and Spain offsetting declines in Germany and Australia.
Imperial Brands said its focus in NGP and vaping is improving performance and returns, with market trials for vapor and heated tobacco products on track for later this year. The NGP division saw sales slump 27% last year, prompting a £124 million ($170 million) write-down.
“Next Generation Products, responsible for cigarette alternatives like vapor and heated tobacco, has been somewhat of a disappointment so far, though management expects the division to perform better this year,” Hoy added. “Sustained growth in alternatives is crucial because tobacco pricing can’t prop growth up forever.”
Imperial Brands’ update came on a positive day of trading. The FTSE 100 /zigman2/quotes/210598409/delayed UK:UKX +1.15% , the index of London’s top stocks by market capitalization, finished the day around 0.5% higher.
“Two recent worries for the market seemed to have eased on Tuesday with the Suez Canal finally unblocked and concern over the Archegos family office saga beginning to die down,” says AJ Bell investment director Russ Mould.
“This is allowing markets to focus on President Biden’s latest plan to revive the U.S. economy — a massive wad of infrastructure spending,” Mould added. “The FTSE 100 was certainly putting on its happy face, driven by resources and financial stocks.”
Bank stocks led the charge higher, with shares in Barclays /zigman2/quotes/208409333/delayed UK:BARC +1.40% , HSBC /zigman2/quotes/208272822/composite HSBC +1.83% , Lloyds /zigman2/quotes/202285510/delayed UK:LLOY +2.65% , NatWest /zigman2/quotes/203233010/composite NWG +2.42% , and Standard Chartered /zigman2/quotes/200125072/delayed UK:STAN -0.08% all buoyed. Financials are higher across Europe after some bank stocks took a big tumble on Monday amid the fallout of a near-$30 billion selloff linked to a margin call on Archegos Capital Management.