UPDATE 1-Imperial Tobacco says first-quarter result keeps it on track

Thu Feb 13, 2014 3:22am EST

* Q1 underlying net tobacco revenue up 1 pct

* Confirms guidance for "modest" growth in full-year EPS

* Shares up 0.3 pct

LONDON, Feb 13 (Reuters) - Imperial Tobacco Group said underlying tobacco net revenue rose 1 percent in the first quarter, in line with its expectations, as it maintained momentum in growth markets in the Middle East and Asia.

Imperial, maker of Davidoff and Gauloises cigarettes and the world's No. 4 international tobacco company by market share, posted first-quarter tobacco net revenue of 1.56 billion pounds ($2.6 billion).

The British group said it was on track to meet its outlook for the year of modest growth in earnings per share at constant exchange rates and for at least a 10 percent increase in dividends.

Imperial and its rivals such as Philip Morris International and British American Tobacco PLC are grappling with declining sales in a number of markets due to increasing government regulation and more health-conscious consumers, as well as economic weakness and smuggling.

Imperial said it had a "resilient" performance in mature markets, with tobacco net revenue up 1 percent as strong results in Australia and Germany were in part offset by industry declines in Britain and Poland.

Imperial is focusing on 10 top growth brands, which include West and JPS, and on markets where it has typically less than 15 percent share and opportunities to grow, such as the United States and countries in the Middle East and Asia.

Its top brands grew volumes by an underlying 2 percent, it said, accounting for 43 percent of its total volume, up 3 points on a year ago, and 39 percent of its net tobacco revenue.

Shares in the group, which have fallen 3.6 percent in the last 12 months, were trading up 0.3 percent at 2,229 pence at 0804 GMT.

Tobacco groups have spotted an opportunity in electronic cigarettes, battery-powered metal tubes that turn nicotine-laced liquid into vapour which are gaining in popularity in Europe and the United States.

The company had said late last year that the launch of e-cigarettes and cost cuts would help it deliver "modest" earnings growth in fiscal 2014, which began on Oct. 1, or growth below the 6 percent it saw in fiscal 2013. It had also said that cost cuts were expected to yield savings of around 60 million pounds in 2014.