Imperial Tobacco Group Plc, Europe’s second-biggest tobacco company, rose the most in a year in London trading after the Sun reported that the U.K. government has scrapped plans to consider legislation on plain packaging.
The shares jumped as much as 2.9 percent to 2,373 pence, the steepest intraday advance since May 1, 2012. British American Tobacco Plc rose 0.4 percent to 3,620 pence.
While U.K. Prime Minister David Cameron initially backed plans for plain packaging, he has backed away as such a move would damage the packaging industry and cost 3 billion pounds ($4.7 billion) in lost tax revenue, the Sun reported. The proposed law is to be pulled from the Queen’s speech on May 8, which is the government’s announcement of its program for the next parliamentary session, the newspaper said.
“If this is true, it is good news for tobacco shares and Imperial in particular,” said Erik Bloomquist, an analyst at Berenberg Bank in London. Imperial Tobacco is market leader in the U.K., with a share of about 45 percent.
Australia became the first country to introduce plain packaging on Dec. 1. All cigarettes in the country must be sold in uniform packs, with the brand name relegated to the bottom quarter of the package on a drab brown background. Both Imperial Tobacco and BAT have said so far they have seen no significant fall-off in cigarette consumption there.
The U.K. government hasn’t released the results of its consultation on plain packaging, the Department of Health said today in an e-mailed statement.
“The government has an open mind on this issue and any decisions to take further action will be taken only after full consideration of the consultation responses, evidence and other relevant information,” the department said.
Imperial Tobacco doesn’t believe plain packaging will have a “material impact” on consumption, “which is one of the reasons why we are so against this,” Corporate Affairs Director Matthew Phillips said on a press call this week. “There are a lot of other things the government should be focused on right now, but the first step is the result of the consultation.”
Imperial Tobacco shares traded at 2,369 pence, up 2.7 percent, at 12:09 p.m. in London.