4th May 2016 10:48
LONDON (Alliance News) - Further packaging rules are set to come into force for tobacco giant Imperial Brands PLC following a ruling handed down Wednesday, as the group said interim pretax profit dipped despite a boost from its US business pushing up revenue.
The European Court of Justice on Wednesday upheld new European Union rules on tobacco products which will pave the way for standardised packaging across the 28-nation block. The court ruled the extensive standardisation of packaging, a future EU-wide prohibition on menthol cigarettes, and special rules on electronic cigarettes all are lawful.
It follows a challenge made to the rules by US cigarette giant Philip Morris International and Imperial's London-listed peer British American Tobacco PLC. Imperial and Japan Tobacco International were both interested parties on the challenge.
After the ruling, that challenge cannot progress any further, and the EU Tobacco Products Directive will now come into force on May 20, though a one-year sell-through period will be in place to allow wholesalers and retailers to sell existing stocks.
The ruling came as Imperial Brands, which changed its name from Imperial Tobacco Group in February, said pretax profit more than halved GBP452.0 million in the six months to the end of March, down from GBP1.05 billion a year earlier. The dip was mainly due to finance costs rising due to fair value losses on derivatives, plus lower gains on the same instruments.
The group said it will pay a 47.0 pence per share interim dividend, up from 42.8p a year earlier.
Revenue for Imperial grew in the half, up to GBP12.81 billion from GBP12.13 billion, driven by gains made on brands acquired in the US as part of the acquisition of Lorillard Inc by Reynolds American Inc. Imperial's total tobacco volume fell 3.1%, down to 133.9 billion stick equivalents against 138.2 billion a year earlier, but volumes for Imperial's Growth Brand portfolio grew 0.3%. Excluding Iraq and Syria, Growth Brand volumes grew 4.7% in the half.
Imperial said revenue also grew in its Specialist Brand portfolio, driven by premium cigars and blu, its electronic cigarette brand acquired as part of the Reynolds-Lorillard deal.
The US proved a big driver of revenue growth in the half, with market share gains for its Winston and Kool brands and with the integration of the assets Imperial has acquired now largely complete. The Winston and Kool brands also were purchased from Reynolds as part of the Lorillard merger.
Imperial said it is on track to deliver GBP55.0 million in annual savings for the full year and said its adjusted operating margin grew to 46.4% in the first half, a 240 basis point expansion year-on-year.
"This was a strong first-half performance, as we continued to deliver against our strategic agenda. Our quality of growth continues to improve, and we achieved excellent results from ITG Brands. We're focused on maintaining momentum in the second half and remain on track to meet full year expectations and create significant value for our shareholders," said Alison Cooper, Imperial's chief executive.
Imperial shares were down 0.8% to 3,712.00p Wednesday.
By Sam Unsted; [email protected]; @SamUAtAlliance
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