Imperial Tobacco Earnings Hit by Black Market Cigarette Sales -- City Index UK

Imperial Tobacco Earnings Hit by Black Market Cigarette Sales -- City Index UK 
LONDON -- (Marketwire) -- 01/30/13 --  City Index UK: Imperial
Tobacco, the world's fourth largest cigarette maker, announced today
that first quarter revenues grew by 2% to the end of December 2012,
but deteriorating performance in Europe and Russia at the end of the
quarter and into January -- thanks in part to higher competition and
sales of black market cigarettes -- would mean that H1 (first half
year) performance would see falling profits. 
Read Full Article at Imperial Tobacco earnings hit
by black market cigarette sales 
The performance in Europe dragged on brighter performances in other
key growth markets for the firm such as the Middle East, Africa and
Asia. In these regions, revenues grew by 12% and volumes increased by
10% for key brands such as Davidoff. 
The tobacco firm tried to reassure shareholders that full year
performance would however meet expectations. 
A key now for investors is this -- do we believe them? 
Second half year performance is predicted to account for 55% of the
firm's total annual profit so there is absolutely room to recover.
However, performance in Europe and Russia is particularly concerning
given the economic headwinds are unlikely to see consumers change a
growing habit of sourcing cheaper cigarettes. In the EU, the firm
estimates that the legal cigarette market size is down 7%. 
The real answer here depends on how quickly the firm can grow outside
of Europe. They are accelerating their cost efficiencies, which are
expected to help fund growth in key target markets in Africa, Asia
and the Middle East throughout the year. Read more 
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Joshua Raymond
City Index
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