Imperial Tobacco Posts Profit on Cigarette Prices

Source from:  Bloomberg 04/28/2010

Imperial Tobacco Group Plc, Europe's biggest tobacco company, posted a first-half profit that beat analysts' estimates after the maker of West, Davidoff and JPS cigarettes increased prices. Net income was 689 million pounds ($1.06 billion), Bristol, England-based Imperial said today in a statement, exceeding the 636 million-pound average estimate of five analysts compiled by Bloomberg. The company had a year-earlier loss of 149 million pounds, caused by currency and interest rate hedging. Cigarette makers have increased prices to counter sliding demand from falling smoking rates in the U.S. and Europe. Imperial Tobacco's revenue from tobacco, which also includes cigars and roll-your-own tobacco such as Gold Leaf in the U.K., increased 4 percent, even as selling volumes fell 2.1 percent. "The biggest positive surprise was the pricing," said Evolution Securities analyst Chas Manso de Zuniga, who had estimated tobacco revenue to rise 1.5 percent. "That's what we want to see. We want tobacco companies that have good pricing." Imperial Tobacco rose as much as 48 pence, or 2.5 percent, to 1,995 pence in London trading. The stock traded at 1,993 pence as of 9:40 a.m., making it the biggest gainer in the FTSE 100 Index. Manso has a "buy" recommendation on the stock. Lower Volumes "We made gains with our global cigarette brands," Chief Executive Officer Gareth Davis said in the statement. "We are focused on maintaining this growth momentum and are encouraged by the upward trend of our most recent cigarette shares in a number of mature and emerging markets." Cigarette volumes fell 1.4 percent in the fiscal second quarter and 3.7 percent in the first half, Davis told reporters on a conference call today. The decline was caused by lower demand in the U.S. and Spain and a disruption to supply networks in the Middle East, according to the company. Second-half volumes in the U.S. will be "significantly" higher, Davis said, and Imperial's market share in Spain "has started to grow again," helped by Ducados Rubio sales. Last year, Imperial Tobacco said it had "fair value" losses on derivatives used for hedging of 937 million pounds and amortization of 224 million pounds from acquisitions. Enditem