Last week Imperial Tobacco held Annual General Meeting reporting its financial results and business performance during the fourth quarter and full year.
The fourth largest tobacco company in the world admitted that revenues dropped 1% during the fourth quarter ending on Dec 31st, in comparison to the same period last year, and total shipping volumes were down by 7%.
During the same period in 2010, revenues were up by 5% with volumes rising by 1.2 percent.
The cigarette maker confirmed that 3% of the fourth quarter volume drop occurred during the current trade embargo in Syria and two-digit volume drop in Spain. Sales in Spain, one of the major tobacco markets for the company, have been affected by the price war that began in the local cigarette market last summer. Imperial Tobacco then had to decrease prices of its low-cost brands, including Fortuna and Ducados Rubio.
Alison Cooper, the company’s Chief Executive stated in November that whereas the price issue had stabilized, the tobacco market would still demonstrate volume reductions in the last quarter of 2011 and the first quarter of 2012, despite the level of decrease has slowed down.
Addition 3% of volume loss resulted from price hike in the USA and market de-stocking in Ukraine, according to the company’s report.
Market analysts admitted they were disappointed by the company’s volume drop, although it was somehow predictable, and noted that the tobacco giant would have to persuade investors the problems in several key markets would be over in the next months.
Excluding currency fluctuations and difficulties in the aforementioned four markets, Imperial Tobacco revenue went up by 3% with volumes dropping a slight 1%, the company confirmed.
The U.K.-based cigarette maker declared revenues from its key drive cigarette brands added 10% with Gauloises Blondes, West, Davidoff and Classic showing a very strong performance. Premium cigar brands volume was up by 14% in developing markets, led by Russia and China.
Among top priorities for Imperial Tobacco is further consolidation of its position in emerging markets, including Asian, African and Eastern Europe countries, where middle-class adult populations are growing.
Adult smokers from developed markets are turning to low-cost cigarette brands as governments implement tax increases and public spending cuts and unemployment rates grow.
In order to offset the volume drops in mature markets, major tobacco companies are forced to increase prices in the U.S and Western Europe to maintain income growth.
Despite cigarette sales are affected by advertising restrictions, public smoking bans and social stigma, tobacco stocks have retained their performance as smokers hesitate to change their habits.
Imperial and its rivals—U.S. and Switzerland-based international cigarette market leader Philip Morris International Inc., U.K.-based British American Tobacco and Japan Tobacco Inc.—represent nearly 70% of the total cigarette production, except China, where state-owned China National Tobacco Co. has set a monopoly.