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Imperial Tobacco Volume Drop Worsens Amid Contraction

Imperial Tobacco Group Plc, the maker of Davidoff cigarettes, said volume declines worsened in the last quarter as fewer people smoked in Spain and the U.S.

The quantity of cigarettes sold dropped 4.3 percent in the nine months through June, the Bristol-England based company said today. That compared with the 3.7 percent drop recorded in the first half of the year.

The performance in the first nine months was “in line” with the company’s expectations after Imperial raised prices in some markets, it said. “Overall, we are performing well in what remains a challenging operating environment,” Chief Executive Officer Alison Cooper said in a statement.

The Spanish cigarette market contracted by 11 percent in the 12 months through June, Imperial said. The company’s share of the country’s domestic blonde cigarette market fell to 29.2 percent from 30.6 percent following price rises and a decline in tourism in the country. In the U.S., cigarette market volumes were down 8 percent in the year through June, Imperial said.

Imperial Tobacco’s U.K. market share rose to 45.4 percent as of June 30 from 45.3 percent a year earlier as budget cigarettes such as JPS Silver and Windsor Blue gained in popularity. The duty-paid U.K. cigarette market was unchanged from a year earlier at 44.9 billion, it said.

Shares Drop

The shares fell as much as 51 pence, or 2.7 percent, to 1,857 pence and traded at 1,868 pence at 8:47 a.m., on track for the biggest decline in three weeks. The stock has lost 4.7 percent this year, while the FTSE 100 Index dropped 4 percent.

The tobacco company, which also sells Gold Leaf roll-your-own products and Cohiba cigars, got about a fifth of its operating profit from the U.K. in the year ended Sept. 30. About 15 percent came from Germany and 10 percent from Spain, after the 12.6 billion-euro ($16.1 billion) takeover of Altadis SA, the Madrid-based maker of Fortuna cigarettes, in 2008.

“Imperial’s product portfolio remains well-positioned to benefit from downtrading” in Europe and the U.S., Rogerio Fujimori, an analyst at Credit Suisse, wrote before the report. He has an “outperform” recommendation on the stock.

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