Imperial Tobacco predicts no repeat of ‘perfect storm’ Spanish price wars as profits edge higher

Tobacco net revenues were up 2pc but, if the impact of Spain and a change to UK trade buying patterns were excluded, adjusted tobacco net revenues were up 4.5pc, the company said.

Alison Cooper, Imperial Tobacco’s chief executive, described the combined effect of Spain’s ban on smoking in public places, which came into force in January, increases in excise duty and the tough macroeconomic conditions as having caused a “perfect storm”.

Spanish Smoking Ban Sign

Spain introduced a ban on smoking in public places on 1 January and put up cigarette duty in December to discourage smoking and replenish state coffers.

She added: “I would argue it was quite unique in terms of its extremeness because of the relative brand positionings in that market, versus other markets in the world.”

Imperial Tobacco slashed its prices earlier this year to match competitors as the overall market in Spain fell from 80bn cigarette equivalents in 2010 to an estimated 69.2bn in 2011.

The company increased prices again in July in a move which appeared to successfully end the price war and Ms Cooper said that prices were “now back at least at the same level or above where they were before this activity began in the Spanish markets”.

Elsewhere in the eurozone, Ms Cooper said that despite the economic turmoil causing some customers to trade down their cigarette brand, there was not a huge shift in sales patterns.

As Greece struggles to implement tough austerity measures, sales of luxury cigarette line Davidoff had “held up incredibly well” in the country.

Ms Cooper admitted this was “a slight surprise” because, following dominant logic, “you would expect consumers to be seeking value in Greece”.

She added: “This is tobacco and it is resilient in this economic environment and we have the portfolio for consumers where they are looking for value.”

Total pre-tax profits for the twelve months to September 30, 2011, were £2.15bn, up from £2.1bn in 2010, a 1.7pc increase that was in line with analysts’ predictions.

The dividend payment was slightly higher than expected at 95.1p per share, up by 12.8pc. It will be paid on February 17.

Imperial Tobacco shares closed up 1p at £22.75, making it one of only seven risers on the FTSE 100.

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