Imperial Tobacco Company Faces Double-digit Decrease in Spain

February 8th, 2012 00:00

A range of anti-smoking regulations and higher taxes have quickened a double-digit decrease in cigarette volumes in the emerging Spanish market within the 1Q for Imperial Tobacco. Imperial Tobacco company, which produces famous Davidoff and Gauloises brands, refused to present more specific details about the extent of the decrease for the three consecutive months to 31 December, however declared that it expected the rate of decrease to cease within the last months of the year.

It caps a tough year for Imperial in Spain, which is the largest cigarette market by profit after Germany and the UK, coming namely when there was a revenue warning last June because of the price war with its giant rivals as British American Tobacco and Philip Morris International. In November 2011 Imperial presented its full year earned income in Spain that had decreased by more than a quarter to £200m. Jonathan Fell at Deutsche Bank stated that he supposed the losses to restrain.

“The degree of the volume loss in Spain is quite unusual in the context of the emerging cigarette markets- but it is the outcome of the raised taxes, several regulations and complicated economic conditions … the economic situation could not improve quickly but the effect of other factors should decrease so we couldn’t be facing the market decline at a two-digit rate this year.” The strict market in Spain, evident trade sanctions in Syria and price increases in the US, made Imperial’s volumes decrease by 7% and also contributed to a 1 % decrease in net cigarette profit. Meanwhile cigar chompers in Russia and China lifted Imperial’s volumes in developing markets by approximately 14%.

Imperial Tobacco

“The company’s main attention was directed to its three strategic cigarettes brands - Davidoff, Gauloises and West in Africa, Asia-Pacific, and the Middle East markets,” said Alison Cooper, Imperial’s chief executive. “Joint stick equivalent volumes of our main brands increased by 3% and net profits by 10% with our focus on prompting growth in these brands in developing markets and fine cut tobacco in the European Countries,” Mrs. Cooper said. A few days ago shares in Imperial Tobacco closed up about 1.33 % at £23.03.

The obtained wisdom that cigarette stocks like Imperial guarantee a refuge during difficulties in economic situation has been weakened by the company’s problems in Spain. Imperial shares, after a 25% price growth during 2011 were lifted due to a £320m buy-back, have decreased by approximately 5% since the beginning of the year. 2012 Imperial shares are lower priced in comparison to its rivals as for instance BAT.

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