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.
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.