LONDON (Reuters) - British tobacco firm Imperial Brands (IMB.L) signalled more investment in vaping as it reported better than expected full-year revenue and profit on Tuesday.
The company, which makes Gauloises and Winston cigarettes, is preparing to launch a heated tobacco product in Japan in the first quarter of 2019, its chief executive told Reuters.
Rather than burning tobacco to make smoke, those devices heat it enough to create a vapour. The companies believe that makes them less dangerous than cigarettes, and also more attractive to some smokers than e-cigarettes made with liquid.
Imperial also plans to increase investment in its e-cigarette brand blu by around 100 million pounds over the coming six months.
The company is also in talks with health regulators in the United States, the world’s biggest vaping market, about launching a “connected” e-cigarette there with built-in age verification, CEO Alison Cooper said.
Imperial could be ready to launch that next year, she said, at a time when the FDA is cracking down on youth e-cigarette use.
“We continue to think Imperial will surprise investors to the upside in a reduced risk world,” Jefferies analyst Owen Bennett said.
Imperial reported revenue from tobacco and next-generation products rose 2.1 percent to 7.73 billion pounds in the year to Sept. 30. That was better than analysts’ average estimate of 7.63 billion, according to a company-supplied consensus.
Excluding one-off items, adjusted earnings were 272.2 pence per share, topping analysts’ average estimate of 269.3 pence.
For the year ahead, Imperial said it expects to deliver constant currency revenue growth at, or above, the upper end of a 1 to 4 percent growth range.
The investment in blu will result in a slightly lower adjusted operating profit in the first half that will be more than offset in the second half of the year.
It stood by its medium-term guidance for constant currency earnings per share growth of 4 to 8 percent, though it expects to be toward the lower end of the range in 2019.
Imperial said its “next generation” device business should begin contributing to group profit as it exits fiscal year 2019, with margins continuing to build thereafter.
Shares were up 1.5 percent at 0748 GMT in London.
Reporting by Martinne Geller; Editing by Keith Weir