Imperial Cigarette Shipments Rise 45% on Acquisitions

Source from:  By Thomas Mulier July 24 (Bloomberg) 07/25/2008

Imperial Tobacco Group Plc's cigarette shipments rose by almost half in the current fiscal year's first nine months after takeovers added brands from France's Gauloises to USA Gold. Shipments climbed 45 percent to 207 billion cigarettes through June, Bristol, England-based Imperial, the second- largest European tobacco company, said today in a statement. Excluding acquisitions, volumes increased 3 percent. Imperial bought Madrid-based Altadis SA for 12.6 billion euros ($20 billion) in February and spent $1.9 billion in April of last year for Commonwealth Brands Inc., located in Bowling Green, Kentucky. It made the takeovers to reduce dependence on the U.K. and German markets, which are shrinking because of restrictions on smoking. ``Our operating environment remains challenging, but our business fundamentals are strong,'' Chief Executive Officer Gareth Davis said in the statement. Nine-month results met company forecasts, he said. Imperial's share of the U.K. duty-paid cigarette market declined 0.6 percentage point to 45.9 percent, according to the company, whose Lambert & Butler brand is the country's top seller. The sale of loose-tobacco brands to Philip Morris International Inc., concluded in June, will cut about 24 million euros from full-year operating profit, the statement shows. Imperial rose 29 pence, or 1.6 percent, to 1,797 pence in London trading. The stock has dropped 24 percent in 2008, heading for its first annual decline in nine years. French Market Restrictions on public smoking contributed to a 6 percent decline in the U.K. cigarette market and a 5 percent shrinkage in Germany, said Imperial, the maker of West cigarettes. The bans were responsible for about 3 percentage points of the decline in both cases. The French cigarette market contracted by 4 percent as a local smoking ban was extended to restaurants. Imperial's U.S. market share increased 0.3 percentage point to 4.2 percent after local sales of Davidoff cigarettes started in April. Debt shrank to less than 12 billion pounds ($24 billion) at the end of June from 17.1 billion pounds at the end of March, the statement shows. Imperial also said it will end trading of its American depositary receipts on the New York Stock Exchange, which account for less than 5 percent of total dealings in its shares, to reduce costs. Imperial, the maker of Golden Virginia tobacco and Rizla rolling papers, plans to cut 2,440 jobs in Europe after buying Altadis. It aims to close six factories in a reorganization plan that will cost 600 million euros. The company expects annual savings of 400 million euros by the fiscal year ending September 2012 as a result of the measures. Imperial also said today it bought the remaining 57 percent of Swedish snuff maker Skruf in June for a ``non-material'' price. To contact the reporter on this story: Thomas Mulier in Geneva at tmulier@bloomberg.net. Enditem