Publications
Partners
London - Imperial Tobacco Group said it would raise its dividend by at least 10% in the next year, signalling confidence that cost cuts will help it to cope with weak consumer spending and higher taxes that weighed on its annual profit.
Like all tobacco companies, Imperial has been grappling with declining sales in a number of markets, as more people cut back or quit smoking. In addition, weak economies and government tax increases are making cigarettes less affordable, leading to lower-priced brands gaining in popularity.
Imperial, whose brands include Davidoff and Gauloises, has tackled this by cutting costs, including closing factories, resulting in more than £60m of savings in the year to September 30. It said it was on track to save £300m each year by 2018.
The company also recently floated a portion of its logistics business, Logista, on the Spanish stock exchange, raising £395m which it used to pay down debt. At the end of its financial year, its net down was down 11% to £8.1bn.
Imperial Tobacco said it expected to raise its dividend by at least 10% for its new financial year (2014 to 2015), following a 10% increase for the year to September 30.
RBC Capital Markets analysts said the dividend goal was "a signal of Imperial's confidence in its debt trajectory."
The company's shares were up 3% at 2 747 pence at 13:16 on Tuesday, the biggest gainer in the FTSE 100 index , illustrating the attraction of large tobacco firms and their generous dividends in times of choppy markets.
Shares of larger rival British American Tobacco were up about 1.3%, while the FTSE 100 index was about flat.
Missing expectations
The world's fourth-largest international tobacco company said net revenue in its tobacco business fell 6% to £6.58bn in the fiscal year. As of October 10, analysts on average were expecting 6.97 billion, according to a company-compiled consensus.
Excluding foreign exchange rates and the impact of a stock optimisation programme that intentionally reduced inventories in several markets, underlying revenue rose 2%.
Volume, which measures the amount of tobacco sold, fell 4%, which the company said was in line with that of its overall markets.
Adjusted earnings per share fell 3% to 203.4 pence on a reported basis in the year, also missing analysts' estimates of 214.2 pence per share, according to the consensus.
"Trading conditions remain tough in many territories but the actions we've taken to enhance the quality and sustainability of the business have put us in a stronger position to drive growth and create sustainable value for our shareholders," chief executive Alison Cooper said.
The company is set to acquire the Maverick and Salem brands, and blu, the leading US e-cigarette brand, for $7.1bn to ease passage of Reynolds American's $27.4bn purchase of Lorillard.
READ THIS NEXT: Imperial Tobacco results hurt by destocking
