(Adds analyst comment, update shares)
By Martinne Geller
LONDON, Feb 12 (Reuters) - Imperial Tobacco Group reported a 4 percent decline in underlying tobacco volumes for its fiscal first quarter, in line with its broader markets, and stood by its outlook for the year.
The maker of Davidoff and Gauloises cigarettes on Thursday said underlying tobacco revenue fell 1 percent in the quarter, ended on Dec 31. It blamed the timing of price increases, reduced trading in Iraq and lower sales of mass-market cigars in the United States ahead of a brand relaunch.
The results exclude the impact of a “stock optimisation” programme undertaken last year in which Imperial purposefully shipped fewer cigarettes in order to cut inventories throughout the system. On a reported basis, which includes the impact of that strategy, Imperial’s tobacco revenue rose 4 percent, which was ahead of some analysts’ estimates. It did not elaborate.
Imperial’s shares were up 1 percent at 3063 pence at 1120 GMT.
“This trading update supports our belief that Imperial is a strong business with sustainable competitive advantages,” said Morningstar analyst Philip Gorham.
Like all tobacco companies, Imperial is grappling with falling sales in a number of markets as people cut back on smoking due to tighter budgets and growing health consciousness.
It has cut costs and closed factories in its core tobacco business, and recently launched two new products that don’t use tobacco -- a caffeinated mouth strip and a new e-cigarette.
With an ongoing focus on capital discipline and debt reduction, Imperial confirmed its goal to increase its dividend by at least 10 percent this year.
The world’s fourth-largest international tobacco group is set to acquire the Maverick and Salem brands, and the e-cigarette blu, for $7.1 billion as part of Reynolds American’s $27.4 billion purchase of Lorillard. The deals were approved by shareholders but await clearance from U.S. antitrust regulators. (Reporting by Martinne Geller in London; Editing by Mark Potter and Susan Thomas)