Tobacco giant Imperial Brands PLC (LON:IMB) has confirmed it is “on track to meet earnings expectations” for the first-half helped by currency translation benefits, although at constant exchange rates revenues and profits are weaker due to falling volumes, a flat price/mix, and planned investments.
In a pre-close season trading update, the FTSE 100-listed firm said: “First half revenues and earnings per share are expected to be up strongly at actual exchange rates, driven by the benefit of currency translation. We expect a currency translation benefit on net revenue and profit of about 13-14%, at current exchange rates.”
But the group behind the JPS cigarettes and Golden Virginia tobacco brands also confirmed it is “investing an additional £300m in 2017 behind its Growth and Specialist Brands and in key markets to drive revenue growth over the medium-term.”
It said: “As expected, the phasing of the £300m increased investment is biased to the first half, resulting in lower revenue and profit on a constant currency basis, with a stronger second half performance.”
The firm added: “First half revenues are driven primarily by a deterioration in industry volumes following strong industry volumes last year, while price/mix is flat on last year, as previously guided.”
The group said its full-year guidance is unchanged. Imperial Brands will be post half year results on May 3.
In lunchtime trading, Imperial Brands’ shares were 0.4%, or 14p higher at 3,839.5p.
In a note to clients, Whitman Howard analyst Chris Wickham said: “We remain positive about these priorities in the context of brand rejuvenation, cost cutting and alternative forms of nicotine delivery – most notably e-cigarettes.”
He added: “Imperial Brands is an attractive, highly cash generative, well-run company where constant improvements remain in prospect.”
The analyst retained a ‘buy’ rating and 5,100p price target on Imperial Brands’ shares.
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