Imperial Tobacco upbeat over results

The British maker of Lambert & Butler and West cigarettes has been hurt by volume falls in Russia, Spain, Ukraine and the United States as smokers move to cheaper and sometimes illicit cigarettes.

It said yesterday that it expects full-year cigarette volumes to

be down by around the same 4.3 per cent seen at the nine-month stage, contrasting with its statement, in July, when it reported volumes had worsened from a 3.7 per cent drop in its first half.

Taking into account price rises, the maker of Gauloises and Fortuna cigarettes said its tobacco revenue will rise 3 per cent in its year to end-September.

It also said that it expected fine-cut loose tobacco volumes to be up 6 per cent, as smokers trade down to roll-your-own products such as Golden Virginia and Drum, meaning that total group tobacco volumes will decline just 3 per cent in the year.

Analysts said the solid year-end trading statement gave support to Imperial shares, which have underperformed the FTSE 100 by 6 per cent this year and rival British American Tobacco (BAT) by almost 20 per cent.

"We see Imperial's Q4 update as broadly supportive on consensus earnings forecasts at constant currency.

"However, the much hoped-for volume rebound in Q4 has

not materialised," said Investec Securities analyst Martin Deboo.

The Bristol-based company, which acquired Franco-Spanish group Altadis in January 2008, said its key global brands performed well, with Davidoff and West volumes growing and the performance of Gauloises Blonde improving in the second half.

Imperial added that its financial performance stayed in line with its expectations.

"We continue to drive shareholder returns through our enhanced focus on sales, ongoing cost optimisation and the effective use of our cash and I am pleased with our financial delivery," said chief executive Alison Cooper.

Imperial ranks after Marlboro maker Philip Morris International, BAT and Japan Tobacco in terms of global cigarette volumes.