Takeover blamed as Imperial Tobacco profits plummet

Imperial Tobacco's profits took a multi-million pound hit last year as a result of its takeover of Spanish firm Altadis – according to figures released yesterday.

Despite seeing its profits fall from £1.24 billion to £621 million, the Bristol company said it still enjoyed a successful year, particularly in markets outside of Europe.

Chief executive Gareth Davis said sales of premium cigarette brands, such as Davidoff and Gauloises Blondes, were growing strongly in emerging markets, but added that smokers in poorer countries had started turning to cheaper brands as the credit crisis hit disposable income.

Total cigarette sales for the company were up by 46 per cent to 292 billion, with "excellent results in Eastern Europe, Africa and the Middle East complemented by further market share gains in the European Union and rapid expansion in the USA".

Imperial said the proposed merger with Altadis was still on track, but the cost of the merger was likely to hit 300m euros, or £255.8m, by the end of September 2010, and eventually reaching 400m euros by September 2012.

In the UK, where Imperial has a 45.9 per cent share of the market, sales fell five per cent. The company said most of the fall was a result of the smoking ban, while the rest was down to a longer-term fall in the number of smokers.

Earlier this year the company announced plans to cut 2,440 jobs, including 1,060 in France, and closing six factories, including its last remaining factory in Bristol.

The deal with Altadis cemented Imperial's position as the world's fourth-largest global tobacco company, behind Altria Philip Morris, British American Tobacco PLC and Japan Tobacco.

Mr Davis said: "In a year of significant achievement we have completed the acquisition of Altadis and grown our cigarette volumes and shares in mature and emerging markets. Our performance has enabled us to increase our dividend distribution by 26 per cent to £588m, building on our long track-record of creating sustainable value for our shareholders.

"Our international premium cigarette brands, Davidoff and Gauloises Blondes, are driving growth in emerging markets, while our strength in value brands and products has enabled us to capitalise on down-trading in mature markets, a trend which is likely to continue in the current environment."

He added: "We have made further very good progress with the integration of Imperial Tobacco and Altadis, particularly in France where we recently completed the consultation process and where we expect to begin implementing our projects in early 2009.

"We are comfortable with our current financing position and our business is highly cash generative. We are resilient in times of economic downturn and remain focused on efficiently integrating the two businesses, whilst maximising the enhanced growth opportunities presented by our versatile portfolio and extended geographic reach."