This followed first-quarter results that reported market trends worsening in key areas, including the EU and Russia, with rising illicit trade blamed for the declines in legal market size. As such, management expects first-half adjusted operating profit to be down year on year, with 55% anticipated to be delivered in the second half, while full-year results remain in line with expectations.
Q1 did see growth over the whole portfolio, though, with net revenue up 12% and volume growth 10% in key strategic brands Davidoff, Gauloises, West, and JPS. Fine-cut tobacco saw 9% increases in both categories, while Scandinavia's snus business saw 40% and 33% in net revenue and volume growth respectively. Cigars remained stable in net revenue, while volume growth rose 3%.
Overall, this led to total tobacco net revenue rising over 2%, with price mix improvement of 3.5%. Stick equivalent volumes decreased 1%.
However, estimations of the aforementioned EU decline put the legal stick equivalent market size down 5% and the legal cigarette market size dropped off 7%, leading chief executive Alison Cooper to comment: "This reinforces the importance of our two focus areas for 2013: further investing behind our key total tobacco assets and geographies; and accelerating our cost optimisation program, providing funds for investment and mitigation for the full year given the current European environment."
Cooper continued: "Challenging environments also present opportunities; our focus on the consumer, our total tobacco portfolio and new consumer experiences are key to realizing those opportunities and continuing to drive sustainable quality growth."
Elsewhere in the news this morning, Imperial Tobacco announced the appointment of Mark Williamson as deputy chairman of the Board. Williamson joined the Board in July 2007 and was appointed senior independent nonexecutive director in 2012, a role which he will continue to perform.
Additionally, Imperial's finance director Bob Dyrbus has informed the Board of his intention to retire, following 25 years with the company as a senior executive. Chairman Iain Napier commented: "I would like to thank Bob for the huge contribution he's made to our success. As well as taking overall responsibility for the effective financial management and control of the Group for many years, Bob's played a key role in expanding our international operations through acquisitions that have created significant value for our shareholders."
Imperial Tobacco forms a significant part of the holdings of Neil Woodford, the City analyst who manages to beat the FTSE year after year. As such, his choices are well worth taking a look at -- and today's drop-off in the share price might well create a buying opportunity for a FTSE 100 company well regarded by the master investor.
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