E-cigarettes, heated tobacco boost Imperial Brands shares

Imperial Brands is on track to meet its full-year goals helped by strong sales of e-cigarettes and heated tobacco in Europe, it said on Tuesday (17), boosting its shares to a more than two-year high despite plunging profits after the cigarette-maker opted to exit the Russian market.

Shares of the maker of Winston cigarettes and Backwoods cigars were up nearly 7 percent in morning trade, the second-best performance on the STOXX Europe 600 EUR price index.

Investors seem “relieved that the firm is on track to hit its full year guidance figures, as it proceeds in its five year strategy to shift to tobacco alternatives,” Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, said.

As part of its five-year strategy, the group is placing greater focus on boosting demand for heated, modern oral and vaping goods and growing market share in its five biggest combustible territories.

It noted growth in the UK was buoyed by stronger investment in local jewel brands, particularly cigarettes brand Embassy, and ‘relatively stable’ market share in the vaping brand Blu.   

Sales of Imperial’s next generation brands, which include Pulze heated tobacco and Blu e-cigarettes, were up 8.7 percent to £101m (€119m). 

Around a quarter of the decline in profitability derived from exit charges related to the Bristol-based firm’s departure from Russia following the full-scale invasion of Ukraine in late February.

In early March, it suspended all operations in the country, including all marketing and sales activity and production at its Volgograd factory, before transferring them to local investors four weeks ago.

After years of slow growth and market share losses, Imperial CEO Stefan Bomhard laid out a turnaround plan in 2021 focused on its five top markets and expanding next-generation products (NGP) deemed less harmful to health. Together, the United States, Britain, Germany, Spain and Australia account for over 70 percent of Imperial’s revenue.

Imperial’s results came about a week after its rival Philip Morris International’s $16 billion bid last week for smaller rival Swedish Match highlighted the urgency with which cigarette makers are trying to tap new and potentially less harmful alternatives.