Imperial Tobacco Plans to Cut 2,440 Jobs in Europe

Source from:  By Thomas Mulier June 19 (Bloomberg) 06/20/2008

Imperial Tobacco Group Plc, Europe's second-largest publicly traded cigarette maker, plans to cut 2,440 European jobs after buying Altadis SA for 12.6 billion euros ($20 billion) earlier this year. Six of 58 factories will shut as staff numbers fall by about 6 percent, Imperial said today. The plants slated for closure are located in its hometown of Bristol, England, as well as Spain, France, Germany and Slovakia. The maker of Davidoff cigarettes fell 3.3 percent in London trading as the plan failed to persuade some analysts to lift their savings estimates. Western European tobacco companies have eliminated jobs as governments restrict smoking and advertisements. Gareth Davis, Imperial's chief executive officer since the company was spun off from Hanson Plc in 1996, has beat cost-savings goals consistently since the cigarette maker bought German rival Reemtsma in 2002 and then cut 4.4 percent of its jobs. Expectations for today's announcement ``got carried away,'' wrote Jonathan Leinster, an analyst at UBS in London, who repeated his ``sell'' rating on the stock today. He left his savings estimates unchanged and said he's ``not satisfied'' with expense reduction related to the Altadis merger. Almost half of the job cuts, or 1,060 positions, will take place in France, equating to almost a quarter of Imperial's local payroll. The company stuck to forecasts for expenses of 600 million euros for the reductions and plant closings and annual cost savings of 400 million euros by the year through September 2012. Shares Retreat Imperial fell 64 pence to 1,879 pence in London trading. The stock has declined 20 percent in 2008 after rising more than sixfold in the prior eight years. The cigarette maker will need to negotiate with unions over the job cuts and gain approval from the French and Spanish governments. Plans to reduce payrolls have sparked strikes this year by French workers from hospital staff to employees of newspaper Le Monde. ``They're brutally tearing the company apart,'' Jorge Tome, a representative of Spain's Comisiones Obreras union, said in an e-mailed statement. ``Once again they're showing that the only thing that counts is profit and not a social commitment.'' The takeover of Madrid-based Altadis added about 27,000 employees to Imperial's work force. The Iberian company, which was formed when Spain and France merged their tobacco monopolies in 1999, makes cigarettes under brands including Gauloises and Gitanes and also is the world's largest cigar manufacturer. Belgium, Ukraine In addition to the French job cuts, Imperial plans to eliminate 830 positions in Spain, 260 in the U.K. and 250 in Germany. The rest of the cuts will take place in Poland, Russia, Belgium, Italy and Ukraine. The company plans to shut cigarette plants in Berlin and the southeastern Spanish city of Alicante and a fine-cut tobacco factory in Metz in northeastern France. Imperial also proposed closing cigar factories in the eastern French city of Strasbourg, Bristol in southwest England and an unspecified Slovak location. The U.K. has banned indoor smoking in public places and may take more steps, such as forcing shops to keep cigarettes below the counter. France barred smoking in cafes, hotels and clubs this year, and six of Germany's 16 states broadened restrictions that applied to train stations and federal buildings. Imperial bought Altadis to become less reliant on the shrinking U.K. and German markets. Altadis is closing a plant in the southern Spanish city of Seville, where cigarettes were first made. Costs for the takeover contributed to a 45 percent drop in first-half net income to 233 million pounds ($455 million) reported in May by Imperial. To contact the reporter on this story: Thomas Mulier in Geneva at tmulier@bloomberg.net. Enditem