5th Feb 2020 08:14
(Alliance News) - Imperial Brands PLC on Wednesday issued a profit warning following new vaping regulation in the US.
The tobacco major was down 7.1% at 1,814.60 pence in opening trade in London.
Tobacco trading remains in line with expectations, the FTSE 100 constituent told its annual general meeting, but group constant currency net revenue is now seen at a "similar level" to last year and adjusted earnings per share are expected to be slightly lower.
This is because of the US Food & Drug Administration's ban on certain flavours of cartridge-base vapour devices, as well as weaker-than-expected consumer demand for vapour.
In addition, Imperial said it expects a currency headwind on net revenue and adjusted earnings per share of 1% for the half-year and 3% for the full-year.
First half adjusted earnings per share are expected to be down around 10% at constant currency, which the company said is due to the phasing of inventory write-downs, "primarily relating to the US flavour ban". It said half-year adjusted operating profit will take a GBP45 million hit from the inventory write-down, which Imperial said is in line with its previous estimates.
"Regulatory uncertainty and adverse news flow continues to affect demand in the US and Europe. We estimate this will result in significantly lower year-on-year [Next Generation Product] net revenue as well as increased provisions for slow-moving stock," Imperial said.
The firm said it is implementing a further cost-savings programme to counter some of these headwinds, which will result in a full-year hit to adjusted operating profit of GBP40 million.
Its Tobacco business, though, had a good start in the first three months of the financial year.
"The Europe division has benefited from price/mix gains, which have largely offset weaker volume trends. Our US business remains strong, although financial delivery has been temporarily affected, as anticipated, by wholesaler destocking following the year end price increase. The Africa, Asia and Australasia division has delivered revenue growth," said Imperial.
Meanwhile, negotiations over the potential sale of Imperial's Premium Cigar Division remain ongoing, the company said, adding: "We continue to consider the potential divestment of other non-core operations."
By Lucy Heming; [email protected]
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