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Gauloises Maker Counts on Cost Savings

Published on August 26th, 2013 00:00

Imperial Tobacco, the world's No. 4 cigarette manufacturer, stuck to its entire-year profits direction a few days ago, relying on cost reductions in order to compensate decreasing sales from economic recession and smuggling in its key European markets. Shares in the company increased over 4 %, in spite of sales dropping 7 % in the first nine months of the current year and lacking analysts' estimations, after Chief Executive Alison Cooper stated objectives were unrevised and that cost reductions would provide savings of 30 million pounds ($46.6 million) in 2013. "We proceed to concentrate on increasing prospects for our overall tobacco portfolio in the EU in opposition to a backdrop of fragile industry volumes and are generating positive results in-market activities in Asia-Pacific and Africa and Middle East, with our share strengthening in numerous markets," Cooper added.

The company claimed in April that expansion in its profits per share would be directed towards the lower end of its 4-8 % objective range, which would lead to profits per share of at the least 209 pence. Imperial, whose largest markets in Europe are Britain, Germany and Spain, documented stick equivalent level - a measurement which consists of loose tobacco as well as readymade cigarettes and earnings decreases of about 7 % and 3 % correspondingly. That compares with volume drop of 5.9 % within six months. The group's stocks have decreased 9 % ever since the start of the year, surpassing sector competitor British American Tobacco (BAT) by around 19 %.

Imperial claimed its key cigarette brands like Davidoff, Gauloises, West and JPS were exceeding the market. It calculated European Union industry volumes dropped 6 % within this time period.

Experts Owen Bennett at Nomura, on the other hand, stated the group's general performance at those smoking products was trailing BAT. "Global cigarette brands dropped 4 % within nine months, that signifies more than 10 % in the quarter," he stated. "Taking into account they are placing their entire target on strategic brands that increases questions."
Imperial Tobacco also explained it would release its first e-cigarette through its branch Fontem Ventures in 2014.