* First-half adjusted earnings 93.1 pence, vs poll 92.7p
* Sets annual share buyback worth 500 million pounds
* Sees recovery in Q2 and momentum building for H2
* Interim dividend up 13 percent at 31.7 pence
* Shares up 2 percent
By David Jones
LONDON, May 1 Imperial Tobacco, the
world's No. 4 cigarette group, set a 500 million pound ($812
million) share buyback and said it saw a return to sales growth
as the West and Gauloises cigarette maker put many of its 2011
problems behind it.
The British company, which sells over 340 billion cigarettes
annually, reported that half-year earnings beat forecasts as it
gained from the ending of a price war in Spain and the unwinding
of destocking in the United States and Ukraine.
Chief executive Alison Cooper was upbeat despite two of its
biggest markets, Britain and Spain, slipping back into recession
as it countered the downturn with a twin strategy of offering
cheaper cigarettes and roll-your-own tobacco products and hiking
the prices of offerings aimed at more affluent consumers.
"We are a defensive sector and have seen a bit of softness
but even in this environment we can do well and have a lot of
momentum going in the second half both in the EU and outside the
EU," she told a briefing after half-year results on Tuesday.
Cooper said the group offered a range of products from its
top brands like Davidoff, Gauloises, West and JPS through to
fine tobacco like Gold Leaf and Golden Virginia Yellow to cope
with tough economic climates in many of its markets.
Imperial, like bigger rivals Philip Morris, British
American Tobacco and Japan Tobacco has in
parallel been hiking prices and expanding into emerging markets
to offset declining smoking levels in many mature markets.
Imperial shares rose 2 percent to 2,513 pence by 0810 GMT,
one of the biggest risers in the FTSE 100 after seeing
its shares recover by nearly 20 percent over the last year as
sales and cigarette volumes have started to come back.
"The tone from management is upbeat, with sales momentum
building into H2 on the back of increased innovation," said
analyst Dirk Van Vlaanderen at brokers Jefferies.
The group saw a return to sales growth in the first three
months of 2012 with revenues ahead 8 percent, putting its half
year to end-March sales rise at 3.3 percent after Spain, the
United States, Ukraine and United Nations sanctions on Syria hit
revenues in the last three months of 2011.
Its cigarette volumes recovered in its second quarter to be
down 1 percent, while the half-year was off 4.1 percent.
The 500 million pound buyback follows a similar-sized
scheme last year when it promised dividends would grow faster
than earnings to push its payout ratio to shareholders to over
50 percent after paying down debts from its 2008 Altadis buy.
The Bristol-based group, which also makes Lambert & Butler,
Embassy and Fortuna cigarettes, reported adjusted earnings rose
5.3 percent to 93.1 pence a share for the half year to
end-March, beating a forecast of 92.7 pence from Reuters
The interim dividend was raised 13 percent to 31.7 pence.
Tobacco groups rich with cash have been paying big dividends
and buying back shares, with Imperial paying out 50.6 percent of
annual earnings as dividends.
BAT launched a 1.25 billion pound buyback this year and
raised its 2011 dividend 11 percent in its aim to pay out 65
percent of earnings as dividends.
Cooper highlighted she remained opposed to proposed
legislation which would force manufacturers to sell cigarettes
in plain packs with product names in standard typefaces.
She said this was unnecessary, not supported by any evidence
it discouraged underage smoking and threatened the group's legal
Australia is planning to be the first nation to introduce
this plain packaging legislation in December, while Britain has
begun a consultation process and the New Zealand cabinet has
agreed to impose it subject to a consultation process.