#parents | #teensvaping | Imperial Brands warns vaping crackdown will hit earnings

Tobacco group Imperial Brands warned that earnings would fall this year as a crackdown on vaping in the US hit efforts to move away from traditional cigarettes.

The group said net revenues across its vaping business, which includes e-cigarette brand Blu and heated tobacco products, would be “significantly lower” than a year earlier. Imperial, which this week named Stefan Bomhard as new chief executive, has suffered after US authorities banned certain vaping pod flavours and consumer demand weakened following an unexpected outbreak of illnesses among American teenagers who use vaping products.

The group’s shares were down 8 per cent to £17.95 in morning trading in London.

“How they have got the US so wrong, with a product that is not worse than anyone else’s and a brand with greater starting equity than anyone else (Blu was the original market leader), is beyond me,” said Owen Bennett, an analyst at Jefferies.

“It appears the new CEO has a big job on his hands getting the US vapour business back on track and convincing the market Imperial can make a success of building [reduced risk] brands.”

Imperial bought the E-cigarette brand Blu in 2015, when US competition authorities enforced divestments after rival British American Tobacco took over the US tobacco company Reynolds. The UK-listed group lost share in the US as it struggled to rebuild the distribution networks and retail relationships that Blu previously benefited from as part of the Reynolds-Lorillard group.

Imperial, which also makes Gauloises cigarettes, said on Wednesday that it expected first-half earnings per share to fall 10 per cent as it phased out stock affected by the ban.

Full-year adjusted earnings per share would be “slightly lower” than last year, it said, while overall net revenue would be at a similar level to last year’s £7.7bn.

Tobacco companies have been ploughing investment into alternatives to cigarettes as tobacco sales have declined in the west. But a backlash against the products following what health authorities in the US called an “epidemic” of vaping among young people has increased regulatory scrutiny of the new products.

Imperial has come under heavy pressure from investors to improve its prospects in recent months. Shares in the company have fallen more than 27 per cent in the past year.

In September, chief executive Alison Cooper was ousted by the board after a cut to the company’s revenue growth forecast. On Monday, it was announced that she would step down with immediate effect as the company named her successor. Stefan Bomhard will join the FTSE 100 company from the car dealership Inchcape.

In the trading update, which was published ahead of Imperial’s annual meeting on Wednesday, the company said its tobacco business had a “good start” to the year with price increases making up for volume declines in its European markets.

It added that negotiations for the sale of its £1.5bn premium cigar division, which includes the MonteCristo and Romeo Y Julieta brands, were “ongoing”.


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