Imperial Tobacco Hurt by Spanish Price War

Source from:  Reuters 09/22/2011

LONDON (Reuters) - Imperial Tobacco Plc, the world's fourth-largest cigarette group, expects sales to rise just 2 percent in the current year after being hurt by a savage price war in Spain, though recent price rises may ease the pain there. Imperial is market leader in Spain with a near 30 percent share from brands like Fortuna, Ducados and Nobel, but suffered from a market depressed by economic woes and a 2011 ban on smoking in public places which sparked a price war this year. Analysts say the outlook for 2012 has improved in the Iberian (Euronext: NEIBI.NX - news) market, Imperial's third most profitable market after Britain and Germany, as all major tobacco players there have recently increased cigarette prices. Imperial's annual sales rise was in line with expectations and was unlikely to lead to any major changes to earnings forecasts, analysts said, and the group said on Wednesday its performance in the year to September 30 remained in line with its expectations. Imperial shares rose 1.9 percent to 21.33 pounds by 8:05 a.m. in a lower London stock market. The Bristol-based group, which also makes Gauloises, West and Lambert & Butler cigarettes, said in a trading update that growth was particularly strong in eastern Europe, Asia Pacific and EU markets outside Britain, Germany and Spain. The company expects annual sales, excluding Spain and the impact of a UK price increase, to rise around 3 percent compared with overall annual sales at constant exchange rates seen up 2 percent. The group, which makes over 300 billion cigarettes annually, sees cigarette volumes declining in the 12-month period by around 2 percent, but excluding Spain and the UK price rise effect then volumes are seen down by less than 1 percent. Imperial raised its cigarette prices in Spain in July and September, alongside price increases by the world's three biggest players -- Philip Morris International , British American Tobacco and Japan Tobacco (Dusseldorf: JAT.DU - news) . Analysts expect earnings for the year through September 2011 of 187.3 pence a share, according to Reuters SmartEstimates, compared with the previous year's figure of 178.8p. The group was giving its trading update towards the end of its financial year on September 30 and ahead of its annual results due on November 1. Enditem