Imperial Brands' profit lifted by price hikes, demand for tobacco alternatives

(Reuters) - British cigarette maker Imperial Brands reported higher first-half operating profit on Wednesday, thanks to price hikes and growing demand for tobacco alternatives.

WHY IT'S IMPORTANT

Imperial's results come amid a series of regulatory hurdles in the industry.

The U.S. is planning a ban on menthol cigarettes after decades of backlash from anti-smoking groups, while British Prime Minister Rishi Sunak is also planning to ban anyone aged 15 and under from buying cigarettes.

CONTEXT

After years of slow growth and losses in market share, Imperial outlined a turnaround plan in 2021 focusing on its five top markets and beefing up investments in next-generation products (NGP), which were deemed less harmful to health.

The maker of Winston cigarettes and Backwoods cigars has also been able to offset volume declines in cigarettes via price hikes.

BY THE NUMBERS

Adjusted operating profit grew 2.8% in constant currency to 1.67 billion pounds ($2.10 billion) for the six months ended March 31. Analysts in a company-compiled consensus had expected a profit of 1.678 billion pounds.

Sales of Imperial's NGP brands, which include Pulze heated tobacco and blu e-cigarettes, were up 16.8%. The company also raised its interim dividend by 4% to 44.90 pence.

KEY QUOTES

"Pricing actions in tobacco taken in the first half and good momentum in NGP gives us confidence in our ability to deliver full-year results in line with our guidance," CEO Stefan Bomhard said.

WHAT'S NEXT

The company said its turnaround plan would result in further improvement to adjusted operating profit growth, supporting mid-single-digit percentage constant currency compound annual growth rate over the final two fiscal years of the plan.

Bomhard said that any implementation of a ban on menthol cigarettes in the U.S. is "several years away."

($1 = 0.7942 pounds)

(Reporting by Eva Mathews in Bengaluru; Editing by Varun H K)