Cigarette maker Imperial's latest figures provide good news for investors

Lambert & Butler and Golden Virginia group Imperial Tobacco cheered investors yesterday with a return to sales growth in the last three months of 2010.

The world's fourth biggest cigarette maker reported sales gains for both fine cut tobacco and cigarettes in the first quarter of its financial year to December 31, with volumes up 0.5 per cent and 6.3 per cent respectively.

The Bristol-based group has benefited from demand for value brands and sales of its products in emerging markets.

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Stick equivalent sales volumes - covering both cigarettes and cut tobacco - rose 1.2 per cent in a turnaround on the 2.9 per cent drop seen in its last financial year.

Shares rose 5 per cent on the update, helping claw back some of the recent share price falls seen by Imperial since the start of the year.

It said its UK arm held sales volumes largely stable at 56.3bn in the 12 months to December 2010 against 56.6bn in 2009.

Imperial's share of the UK cigarette market edged up by 0.1 per cent to 45.3 per cent, but its share of fine cut tobacco market fell from 57 per cent to 53.5 per cent.

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The group has raised prices twice in the UK since September, with the latest hike sparked by the Government's move to increase VAT to 20 per cent.

The price increases have added an average of between 29p and 35p per pack.

Imperial has seen cash-strapped UK consumers turn to cheaper economy brands and cut tobacco in the past few years.

The group said yesterday it was continuing to see strong demand for JPS Silver and Windsor Blue cigarettes, as well as value fine cut tobacco brands Gold Leaf and Golden Virginia.

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Martin Deboo, analyst at Investec Securities, said the positive sales news "should put a stop to the recent rot in the share price and create a platform for a more balanced ticket of top line delivery in the 2011 full year."

He is forecasting a 7 per cent rise in pre-tax profits to 2.6bn for the year to September 30.

But Spain and Greece are challenging markets for Imperial amid eurozone economic woes, according to Imperial. Spanish sales volumes fell 10 per cent in 2010.

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