Imperial Brands sees profits boom after selling its premium cigar arm

Imperial Brands has recorded a surge in earnings following the sale of its premium cigar businesses for £1.1billion last year.

Reported operating profits at the FTSE 100 company climbed by 15.2 per cent to £3.15billion in the 12 months to the end of September, while revenue ticked up only modestly to £32.8billion.

The disposal of the cigar business, which included a 50 per cent stake in Cuban cigar manufacturer Habanos and was one of the cigar industry’s biggest deals ever, also helped slash Imperial’s net debt by around £1.8billion.

Discounting the sale, organic adjusted operating profits rose 4.8 per cent on a constant currency basis thanks to much lower losses in its next-generation products (NGPs) division and a strong performance by its distribution arm.

However, they were held back by the changes in tobacco excise duty and weaker stock profit in Australia, and more than £50million in costs related to legal settlements in the American states of Texas and Minnesota.

But the firm revealed that the Americas still saw the largest growth in net revenues among all regions due to high tobacco pricing and growing sales in mass market cigars brands like Backwoods.

By contrast, organic net revenues across Africa, Asia and Australasia declined 8.2 per cent, not just due to the performance in Australia but also the group’s choice to exit the vapour and heated tobacco markets in Japan and Russia.

Imperial Brands’ chief executive Stefan Bomhard is trying to build up the company’s NGP business as part of a five-year strategy launched under his auspices at the start of the year.

Sales from this division were worth only £188million to Imperial last year, compared to billions from traditional tobacco products belonging to brands like Gauloises, Golden Virginia and John Player.

A few trials of NGPs are currently being conducted, and the market share of Imperial’s vapour brand Blu in several markets, including the UK and France, Situs Judi Slot Jackpot Terbesar is ‘relatively stable’, the firm said.

‘Through our focused, consumer-led next-generation products strategy, we are committed to making a meaningful contribution to harm reduction over time by offering adult smokers potentially reduced-risk products,’ remarked Bomhard.

The former boss of car dealership chain Inchcape added that 2022 would see Imperial making further changes to strengthen ‘the foundations’ of its five-year plan.

‘This would include further internal business re-organisation and significant investments in marketing and sales, mainly in the second half of the year.

Greater investment will result in adjusted operating profit growing slightly slower than net revenue growth in fiscal 2022.Net revenue growth is anticipated to be similar to that in 2021.

Losses in its NGP business, which were £138million in the 2021 financial year, are also expected to be around the same level in 2022 as the company invests in market trials in countries including the Czech Republic and Greece.

Mark Crouch, an analyst at investment platform eToro, said that despite the change in focus towards healthier products, the next-generation products its talks about account for a small proportion of revenue.

‘It’s early days in that transformation, but shareholders will soon want to see progress, particularly when you consider the firm’s shares are down nearly 54 per cent over the past five years.’

Shares in the company were down 0.3 per cent to 1,593.5p during the late morning today.