Tobacco firm's profits burnt by illegal imports
BRISTOL'S biggest firm Imperial Tobacco said that its sales continue to be hit by the increase in black market tobacco and illegal imports across the UK and Europe.
Rising prices and taxes and the recession have resulted in more and more people looking for cheaper alternatives which has hit the profits of the tobacco big firms such as the Ashton-based Imperial.
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The world's fourth largest cigarette maker put out a statement to the Stock Market yesterday which said its revenues had grown by two per cent over the last three months.
But the company also warned its sales in Europe and Russia had been badly hit by the growth in popularity of fake and black market products.
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As a result the company, which has its global headquarters in Bristol, has warned that its performance over the first half of the year is likely to be disappointing and is expected to result in falling profits.
Imperial employs around 500 people in Bristol and is in the process of building a new £20 million headquarters.
The company tends to specialise in budget brands and hand-rolled tobacco but has still been badly hit by the rise in the popularity of cheaper and illegal alternatives.
According to latest estimates around a third of cigarettes and tobacco smoked in the UK comes from illegal sources and the figures are on the increase.
Despite the poor performance in Europe the company is still doing well in other parts of the world such as the Middle East, Africa and Asia.
In these regions, revenues grew by 12 per cent and sales increased by ten per cent for its leading brands such as Davidoff.
Despite the bad news the tobacco firm has moved to reassure its influential shareholders that its full year performance would still meet market expectations. Performance over the second half of the year is expected to account for 55 per cent of the Imperial's total annual profit.
However, performance in Europe and Russia is causing the firm its biggest headache as the economy and consumer spending habits are not expected to improve in the short term.
An analyst at Killik and Co said: "The statement is disappointing, and highlights a difficult start to the group's financial year.
"Although the increased second-half weighting to profits this year may unnerve investors, we believe the group has plenty of self-help strings to pull and that the current valuation of the stock takes this into account."
Share prices fell three per cent after the firm reported their figures yesterday morning.
4 Comments
by Jimenez47
Thursday, January 31 2013, 1:27PM
“The less tax you pay the less the government can spend on their spiteful income redistribution policies.”
by roly12345
Thursday, January 31 2013, 1:15PM
“If I bought my Imperial Tobacco brand in Madrid or Bristol, then I.T. have made a sale.
The idea they are loosing out if I buy my requirements outside of the UK can only suggest they are just another firm on the "rip-off" Britain gravy train.
I for one would like to benefit from closer integration with Europe, but my Government flatly refuses to allow our standard of living to have parity with our neighbours, preferring to drag everyone down to a level of subsistence that competes with the worst of the sweat shop economies.”
by corncups
Thursday, January 31 2013, 8:50AM
“Matthew is right - HM Govt. created a healthy black market for tobacco products by excessively taxing the legitimate market.
You can buy genuine, duty-paid Imperial tobacco in Europe at less than a third of the UK price and in Asia at up to eight times cheaper.
The govt. mistakenly thinks that UK subjects are trapped in a captive island market. They are not and the UK tax saved by purchasing it abroad, even with local tobacco tax paid, can pay for the cost of the return shopping trips to more rational, not to mention warm & sunny, tax jurisdictions.”
by Matthew_Seven
Thursday, January 31 2013, 7:02AM
“Well someone tell the government to remove at least 50% of the tax on the tobacco and people will buy it, who is going to buy tobacco from the shop for like £16 when u can get it for £8 or £9 on the black market. Are they thick or something? Also noone cares if black market tobacco funds crime, they just want the tobacco cheaper.”