Imperial Brands takes £400mn hit to profits as it pulls out of Russia

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It is only major tobacco company to exit country after invasion of Ukraine

The London-listed company reported that operating profits in the year ending September 30 were down 15 per cent to just below £2.7bn.

Imperial said the £463mn drop in profits was largely “driven by” charges related to its exit from Russia and associated markets, which totalled £399mn.

In April, Imperial became the first cigarette maker to leave Russia — as part of a wider corporate exodus following the invasion of Ukraine — after it sold its business to a group of local investors.

Stefan Bomhard, Imperial chief executive, said the company had “responded nimbly” to “unexpected events such as our exit from Russia”.

Rivals Philip Morris International and British American Tobacco have both committed to exit the country but have struggled to find a Russian buyer.

PMI, manufacturer of Marlboro cigarettes, has suspended planned investments and marketing activities in Russia.

BAT, which is behind the Lucky Strike brand, previously said it was in advanced talks to sell its Russian business to a local distributor but has blamed operational complexity for the slow process.

Japan Tobacco International, which has a 37 per cent market share in Russia, has halted new investment but has not committed to leave the country altogether.

Rae Maile, an analyst at Panmure Gordon, said Imperial had the “smallest presence in Russia out of the four big cigarette makers and wasn’t making any money there so it was the easiest exit to achieve”. But he added it was a “point of pride” for the company that it had managed to depart the territory.

Lukas Paravicini, Imperial chief financial officer, stressed that “around half of these charges” from the company’s exit from Russia and its restructuring costs “would not be repeated next year”.

Imperial, which is also behind brands such as blu and Rizla, said despite “current macroeconomic challenges”, including a slowdown in consumer spending and high inflation, it expected growth in adjusted profits in the “mid-single digit range” over the next three years. Adjusted operating profits were up 1.8 per cent to £3.69bn in the year to September 30.

Imperial added that favourable exchange rates because of a weakening pound would lift earnings by 5 to 6 per cent over the year ahead.

The group also announced it was increasing its dividend payout by 1.5 per cent to 141.7p per share. Last month, Imperial launched a £1bn share buyback programme to reward investors. Imperial’s share price was up 1 per cent to £20.55 in morning trading in London.

Original article here:

Author: Oliver Barnes, Correspondent

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