Imperial Invests in Caffeine Products to Counter Smoking Slump -- 2nd Update
May 03 2017 - 6:59AM
Dow Jones News
By Saabira Chaudhuri
LONDON-- Imperial Brands PLC on Wednesday reported lower
half-year operating profit and said it is investing in a
caffeine-based, low-calorie product designed to give users a boost
of energy as part of an effort to diversify.
The remarks come as Imperial--the least diversified of major
tobacco companies--works to combat the impact of declining
cigarette volumes. Imperial on Wednesday reported total tobacco
volume fell 5.7% in the period to 126.3 billion sticks, a
deterioration from the 3.1% decline in the same period a year
earlier. Tobacco net revenue climbed 9.3% but dropped 5.5% at
constant currency.
While rivals such as British American Tobacco PLC and Philip
Morris International Inc. are aggressively investing in future
proofing their portfolio with so-called next-generation products,
Imperial only owns one e-cigarette brand, Blu, which it bought in
2015 as part of Reynolds American Inc.'s $25 billion acquisition of
Lorillard Inc.
Philip Morris has spent $3 billion developing next-generation
products, including a device, called IQOS, that delivers nicotine.
It also owns vapor brands Nicocigs and Vivid. BAT, which makes
Dunhill and Pall Mall, has spent $1 billion over the past five on
this area, including its vapor brand Vype and its own heat-not-burn
product Glo.
Overall, Imperial, which makes the JPS and Gauloises brands,
said net profit rose to GBP675 million ($871 million) in the six
months ended March 31 from GBP290 million a year earlier. Revenue
rose to GBP14.3 billion from GBP12.81 billion.
Earnings were boosted by investment income, which rose to GBP730
million from GBP290 million a year earlier. Without this, operating
profit fell to GBP902 million from GBP1 billion.
Imperial, the third-largest cigarette company in the U.S., said
its Winston and Kool brands had increased market share over the
half while mass market cigars are performing well.
Imperial in 2015 launched a trial version of the energy-boosting
product, called Reon, sold in Manchester and online that was
designed as a strip intended to melt in one's mouth. Wednesday,
Imperial said it continues to invest in this product, which could
be delivered through a variety of formats, including powders and
liquids, but isn't yet looking to commercialize it.
U.K.-based Imperial's results come as the regulatory environment
for traditional cigarettes continues to toughen. The country will
later this month implement plain packaging, under which cigarettes
will be sold in uniform packs stripped of distinctive logos and
colors, and adorned with graphic health warnings. Australia and
France also have plain packaging laws in place and other countries,
such as Ireland and Hungary, are on a path to similar
legislation.
Imperial's Chief Executive Alison Cooper said the company is
working to simplify its brand portfolio to better manage the impact
of plain packaging but that it had increased sales and profit in
Australia despite the industry no longer having the ability to
brand cigarette packs there after a law passed in 2011.
Imperial is on track to meet consensus analyst estimates for the
full year, said Ms. Cooper. Analysts currently expect adjusted
earnings of GBP2.77 a share on tobacco net revenue of GBP7.9
billion.
Write to Saabira Chaudhuri at saabira.chaudhuri@wsj.com
(END) Dow Jones Newswires
May 03, 2017 06:44 ET (10:44 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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