Imperial Brands profits slide 15% on Russia exit

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  • Imperial’s departure from Russia cost the group just under £400 million in profits.
  • The exit contributed to an 8.4% drop in tobacco sales in the second half of the year.
  • Revenues fell despite higher prices offsetting falling tobacco sales.

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Imperial Brands is facing a sharp drop in revenue as the tobacco giant is hit hard by its decision to pull out of Russia after the outbreak of war in Ukraine.

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The Bristol-headquartered cigarette maker behind Gauloises, West and Golden Virginia said operating profit fell 14.7% year on year to £2.68bn in the 12 months ended September.

Imperial’s departure from Russia cost the group just under £400m in profits, while the unrepeatable profit from the sale of the premium cigar business last year had an even bigger impact.

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Earnings: Imperial Brands, owner of cigarette brands Gauloises, West and Golden Virginia, reported operating profit fell 14.7% year on year to £2.68bn.

In March, FTSE 100 suspended operations in Russia, including all production at its plant in Volgograd, and handed over the business to local investors the following month.

This contributed to an 8.4% decrease in total tobacco products in the second half of the period compared to the same period in 2021 and 4.7% year-on-year.

Higher prices helped offset falling output, but a weaker euro against the US dollar meant total revenue still fell £240m to £32.6bn.

Imperial did this by gaining market share in four of the top five fuels markets, where the company generates the bulk of its operating income.

In the UK, the company said the growth in market share was driven by investments in local “jewelry” brands such as Embassy, ​​which have found success in underrepresented regions of the country among thin-cut tobacco brands.

Increasing market share in the five largest tobacco territories – UK, USA, Germany, Spain and Australia – is part of a five-year strategy led by CEO Stefan Bomhard.

The plan also calls for simplifying operations — partly through cost-cutting measures — and expanding sales of “next-generation products” such as heated tobacco and vaping.

NGPs remain part of Imperial’s overall trade, but their popularity is growing as they appear in more territories and governments impose high taxes and regulate cigarette brands.

However, the heavy investment associated with bringing brands such as Pulze and Blu 2.0 to new markets saw the division post another loss of £87m during the year.

Bomhard, who took over the business shortly before the start of the pandemic, nevertheless said the Bristol-headquartered company “is well positioned to deliver the next phase of our five-year strategy.”

He added: “The additional investments and actions we have taken in the initial two-year strengthening phase have laid a stronger foundation as we face a more challenging macroeconomic environment.

“We are well positioned to build on our track record over the next three years, driving profits and delivering sustainable growth in shareholder value.”

Imperial also announced today that it is offering investors a final dividend of £467m next March, in addition to a £1bn share buyback scheme announced in October.

Promotions Imperial Brands rose 0.8% to £20.54 late Tuesday morning, meaning they are up about 30% in value over the past 12 months.

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