LONDON (Reuters) - Imperial Tobacco IMT.L expects first-half adjusted operating profit to be down year on year, hit by growing competition from the black market in Europe as the economic downturn drives smokers towards cheaper cigarettes.
Imperial, the world’s fourth-largest cigarette group, said on Wednesday that trends had worsened in a number of key markets, including Russia, towards the end of the first quarter and into January, though full-year results remained in line with its expectations.
“The growth momentum in key markets in Africa and the Middle East and Asia-Pacific is being offset by the current adverse market dynamics in Europe, with increasing levels of illicit trade,” Chief Executive Alison Cooper said.
“Given our ongoing investment and the European market pressures, we expect first-half adjusted operating profit to be down year on year,” the company said, adding that it expects 55 percent of profit to be delivered in the second half.
Imperial has suffered over the past year, particularly in struggling economies such as Spain. In October the company took a 1.2 billion pound writedown on its Spanish business.
The company said it estimates that the legal stick equivalent market size in the European Union had shrunk 5 percent, with the market for legal cigarettes down by about 7 percent.
Imperial, which makes brands including JPS, Davidoff and Gauloises Blondes, posted a 2 percent year-on-year rise in net revenue in the October to December period, its first quarter, and said that its stick equivalent volumes were down 1 percent over the period.
Revenue in its key strategic brands rose 12 percent, while volumes grew 10 percent against the same period in the previous year.
The company also said its finance director, Bob Dybrus, has decided to retire after a 25-year career with Imperial and that it has appointed Mark Williamson as deputy chairman of the board.
Reporting by Brenda Goh, Editing by David Goodman