LONDON -Imperial Tobacco Group PLC (IMT.LN), maker of Davidoff, Lambert & Butler and JPS cigarettes, Wednesday said it’s on track to meet full-year expectations as it posted a rise in first-quarter sales and volumes boosted by its emerging market operations.
The U.K.-based company also said it would increase its dividend to 50% of adjusted earnings for the full year, sending the stock sharply higher. At 0827 GMT Imperial Tobacco was the biggest riser in the FTSE 100, up 3.6%, or 64 pence at 1858 pence.
Underlying tobacco net sales, which excludes currency exchange effects and other income from its Moroccan business, rose 5% year-on-year in the three months to Dec. 31, while total volumes, which combine cigarette and fine cut tobacco, increased 1.2%. Cigarette volumes rose 0.5%, while fine cut tobacco volumes increased 6.3%.
“We continue to drive sales across our total tobacco portfolio,” Chief Executive Alison Cooper said.
The sales and volume rise was driven by a strong performance from emerging markets. Imperial has said its priority is to continue building its position in growth markets such as Eastern Europe, Africa, the Middle East and Asia.
Smokers in more mature markets, struggling in tough global economic conditions, are switching to low-cost brands in the face of dented discretionary income as governments impose austerity measures such as tax hikes and public spending cuts to rein in borrowing.
To compensate for volume falls, tobacco companies are phasing in price rises in high-exposure mature markets like Western Europe and the U.S. to maintain and build margins.
Imperial said its global strategic cigarette brands grew 7% with Davidoff, Gauloises Blondes and West continuing to perform strongly, particularly in emerging markets.
Davidoff volumes rose over 10%, boosted by “good performances” in Saudi Arabia, Ukraine and Russia. Gauloises Blondes volumes were also up over 10%, supported by growth in the Middle East. West volumes rose by more than 3%, supported by Russia and a number of other Eastern European markets, while regional brand JPS grew 24%.
The U.K. and Germany both recorded virtually flat total volumes and market share while Spain volumes fell 10%, hit by a duty increase and a ban on smoking in public places.
Volumes were down 3% in the rest of the European Union, hit by declines in Greece and Poland. However, the group grew cigarette share in the majority of its markets including Austria, Czech Republic, Greece, Hungary and Portugal.
U.S. volumes dipped 4%, in line with long-term trends, with a market share of 3.9%, the group said. Still, cigar sales grew strongly in both value and volume terms.
In the rest of the world, volumes rose 4%, boosted by Africa, the Middle East and Asia Pacific, while the Cuban cigar business had an “excellent” quarter.
In November last year, Imperial’s full-year net profit more than doubled to GBP1.5 billion, while sales increased 6% to GBP28.2 billion, as a fall in volumes was more than offset by price rises, growth in fine cut tobacco and cost-cutting. It is on track to deliver EUR400 million of savings from the acquisition of Franco-Spanish group Altadis by the end of fiscal 2012.
By Simon Zekaria,
Dow Jones Newswires; firstname.lastname@example.org