TIDMIMT
RNS Number : 1440W
Imperial Tobacco Group PLC
23 July 2009
?
IMPERIAL TOBACCO GROUP PLC
INTERIM MANAGEMENT STATEMENT
Imperial Tobacco Group PLC (Imperial Tobacco) confirms that the overall
performance and financial position of the Group for the financial year to 30
September 2009 remains in line with the Board's expectations.
Summarising today's announcement Gareth Davis, Chief Executive, said:
"We have delivered another good performance in our third quarter, driving sales
throughout our enlarged geographic footprint and achieving further volume and
share growth across our regions.
"The versatility of our balanced portfolio is enabling us to benefit from the
growth in value cigarette and fine cut tobacco brands in mature markets,
whilst continuing to develop our mainstream and premium cigarette brands in
emerging markets.
"Despite the challenges of the wider operating environment, we anticipate
another successful year, with the Altadis integration progressing well and with
our cash conversion expected to exceed 100%. In addition, we have further
diversified our funding base and maturity profile with two successful bond
issues in June. Our focus on building sales, underpinned by efficiently managing
our cost base and minimising working capital, should ensure that we continue to
create sustainable value for our shareholders."
Trading update
The following highlights of our trading performance relate to the nine months to
30 June 2009 unless otherwise stated. All market volumes and market shares are
based on Imperial Tobacco estimates.
UK
In the UK for the 12 months to June, the annual duty paid cigarette market
declined by 1 per cent to 45.0 billion. The rate of market decline has slowed in
recent months due to fewer purchases of UK brands abroad as the impact of a
weaker economy and currency reduced overseas travel. These trends also benefited
duty paid fine cut tobacco volumes which grew by 15 per cent for the 12 months
to June to 4,250 tonnes.
Our strategy of balancing profit and share continues in the UK. Our cigarette
market share for the nine months to June was 45.3 per cent (June 2008: 45.9 per
cent). JPS Silver, launched in November in the economy sector, continues to make
excellent progress achieving a June spot share of 3 per cent and, along with
Windsor Blue, we continue to grow share in the economy sector.
In the nine months to June our fine cut tobacco share was 58.5 per cent (June
2008: 62.1 per cent). Golden Virginia Yellow, launched in March in the economy
sector, has grown to a June spot share of over 1 per cent, and along with our
other value brand, Gold Leaf, is benefiting from downtrading within the segment.
Our overall fine cut volumes for the nine months increased 10%.
Germany
In Germany for the 12 months to June, cigarette market volumes were down 1 per
cent at 86.4 billion. In June 2009, we increased the price of our cigarette
brands and some fine cut tobacco products, including a 20 euro cent increase on
all packs of 17 cigarettes. In mid-July, prices were raised proportionately
following the increase in the minimum pack size from 17 to 19 cigarettes.
Volumes of other tobacco products for the 12 months to June rose by 1 per cent
to 35.6 billion cigarette equivalents with the benefit of downtrading. In
mid-July, the minimum pack size was raised to 30 grams with prices increased
proportionately.
Our cigarette share in the nine months to June was stable at 27.4 per cent with
JPS continuing to grow share to 8.4 per cent. Davidoff and Gauloises Blondes
maintained their respective market shares and West's share is stabilising. Our
market share of other tobacco products excluding cigarillos was 20.3 per cent
(June 2008: 20.9 per cent) with our make your own products performing well.
Spain
In Spain, cigarette market volumes in the 12 months to June declined by an
estimated 4 per cent to 86.1 billion. Various factors have impacted the market
including trade de-stocking, reduced travel retail volumes and further
downtrading into fine cut tobacco. In June, taxes were raised on all tobacco
products and the minimum incidence of duty was increased for cigarettes and a
minimum incidence of duty was implemented on fine cut tobacco. We passed on the
increase in taxes to consumers in full in almost all cases. At the same time, we
further increased the prices of most of our cigarette brands. Market fine cut
tobacco volumes for the year to June grew by more than 50 per cent to 5,050
tonnes as a result of downtrading from cigarettes but the changes in the tax
regime could curtail this growth.
Our share of the domestic blonde cigarette market for the nine months to June
was 30.6 per cent (June 2008: 30.8 per cent) with Ducados Rubio and Nobel
performing well. Whilst we continue to lead the dark segment the anticipated
decline of the segment continued and, coupled with declines in travel retail,
resulted in an overall share for the nine months of 36.5 per cent (June 2008:
37.4 per cent).
Adjusting for brand divestments, our fine cut tobacco volumes grew 44 per cent
for the nine months to June with Fortuna growing share rapidly. Although we have
ceded share to lower priced domestic brands, prices of these have materially
increased post the implementation of minimum incidence of duty in June,
narrowing the price differential to high value brands.
Rest of EU
Rest of EU regional cigarette market volumes were down 5 per cent in the 12
months to June predominantly as a result of significant duty increases in Poland
and Czech Republic, which have led to growing cross-border flows from the east.
Excluding Poland and Czech Republic, regional market volumes were down 2 per
cent. Regional fine cut volumes were buoyant due to downtrading but regional
cigar volumes are still being affected by smoking bans and the economic
situation.
In France, cigarette market volumes rose 2 per cent to 54.3 billion for the 12
months to June following a reduction in cross-border flows and the diminishing
impact of restrictions on smoking in public places. For the nine months to June
our leading blonde brands, Gauloises Blondes, News and JPS had either growing or
stable shares with our total blonde share increasing to 23.7 per cent (June
2008: 23.5 per cent). Our total cigarette market share for the nine months to
June was 28.7 per cent (June 2008: 29.1 per cent) with the decline being
attributable to falling dark cigarette volumes, where we retain leadership.
In Ireland, significant duty increases in October and April have caused a 10 per
cent decline in the duty paid cigarette market with cross-border flows,
particularly from Northern Ireland, rising to an estimated 25 per cent of
consumption. Elsewhere, we made cigarette share gains in a number of markets
including Austria, Czech Republic, Estonia, Finland, Greece, Hungary, Norway,
Portugal and Sweden.
Americas
In the USA, the significant increase in Federal Excise Taxes (FET) on all
tobacco products on 1 April 2009 has impacted the market. Cigarette market
volumes for the three months to 30 June 2009 are estimated to be down by more
than 10 per cent compared to the same period last year. Recent competitor
promotional activity has meant that the rate of downtrading to existing discount
brands is slower than initially expected.
We saw cigar wholesalers and retailers build stocks ahead of the FET increase
and in the last three months they have scaled back their purchases. However,
post FET, data for the 12 weeks to mid-June shows consumer off-take to have been
positive against the same period last year primarily due to increased
promotional activity from some industry participants.
In June, a Bill was passed appointing the Food and Drug Administration (FDA) as
regulator of the USA tobacco industry, excluding cigars. User fees, which are
not expected to have a material effect on our Americas cost base, will be levied
on all cigarette manufacturers with immediate effect based on market shares. We
have extensive experience of operating in highly regulated markets and are
confident of continuing to successfully develop our business under the
regulatory authority of the FDA.
In the nine months to June 2009, our estimated cigarette share was stable at 4.2
per cent with the last quarter seeing some impact from the increased promotional
activity of our competitors. Our premium brand Davidoff, has made encouraging
progress in urban areas and we launched a Slims variant in March. We have
recently extended Fortuna distribution into New York, California and Chicago.
Our fine cut tobacco business has proved to be resilient post the FET increase
following our move to the production of expanded tobacco.
Following an extensive review of our USA cigar cost base, in June we announced
the closure of our Havatampa cigar factory in Brandon, Florida with the
regrettable loss of 495 jobs. The USA cigar market is still in transition post
FET but our recent sales are benefiting from our business adopting normalised
promotional activities. Our premium and natural wrapper products continue to
perform well and we believe that our strength in the large cigar segment and the
high quality of our brand portfolio leaves us well placed to compete effectively
in the market.
Rest of the World
In our Rest of the World region, we continued to grow volumes and shares in the
majority of our markets in the nine months to June.
Our cigarette brands performed strongly in the region with Davidoff volumes up
21 per cent, Gauloises up 10 per cent, Gitanes up 33 per cent and Fine up 25 per
cent.
We are maintaining our growth momentum in Africa and the Middle East, whilst in
Eastern Europe we are seeing our value brands increase share with Maxim in
Russia benefiting from continued downtrading and Classic in Ukraine performing
particularly well.
In Asia Pacific we grew share in New Zealand, Cambodia and Laos. Our market
shares in Australia and Taiwan are stabilising and we remain on track to improve
profitability on last year.
Logistics
Tobacco logistics will benefit from the recent duty and price increases in Spain
whilst other logistics continues to be impacted by the difficult economic
climate. Our logistics team continues to mitigate the impact of the weaker
economy by actively managing the cost base.
Debt refinancing
Following the February bond issues, in June we continued to successfully
diversify our funding base and lengthen our maturity profile by placing a three
year Euro bond for EUR1.25 billion and a ten year Sterling bond for GBP500
million.
Our guidance for the average cost of net debt for the current financial year
remains at 5.5 per cent.
Enquiries
Gerry Gallagher (Director of Investor Communications)
Telephone: +44 (0) 117 933 7014
John Nelson-Smith (Investor Relations Manager)
Telephone: +44 (0) 117 933
7032
Alex Parsons (Head of Corporate Communications)
Telephone: +44 (0) 117 933
7241
Simon Evans (Group Press Officer)
Telephone: +44 (0) 117 933 7375
This information is provided by RNS
The company news service from the London Stock Exchange
END
IMSFGGZNKFGGLZG
|