Imperial Brands - Tobacco Reporter

Imperial ‘on Track to Accelerating Returns’

Imperial Brands reported net revenue of £15.41 billion ($19.32 billion) for the first half of 2023, down 0.3 percent from the same period in 2022. Operating profit rose 27.7 percent to £1.53 billion. On an adjusted basis, net revenue declined 1 percent to £3.66 billion, while operating profit grew 0.8 percent to £1.72 billion.

“We are now in the third year of our five-year strategy, and this means we are moving from the initial foundation building phase to a period of improving financial delivery. We remain strongly committed to an ongoing program of shareholder returns and will complete our initial £1 billion buyback during the second half,” said Imperial Brands CEO Stefan Bomhard in a statement.

“Business performance for the first half of fiscal year 2023 was resilient, despite temporarily increased volume declines against a strong comparator. As expected, this reflects a return to pre-Covid buying patterns as well as our decision to exit Russia last year. In tobacco, we have delivered further share gains in aggregate across our portfolio of top five markets, while also achieving strong pricing to help mitigate the volume declines. We have now recorded stable or growing aggregate market share in these markets in each of the last four six-month periods after many years of sharp declines. In NGP, we have delivered a step-up in innovation with new product and market launches in all three categories: vapor, heated tobacco and modern oral.

I am confident the actions we have taken are creating a stronger, more resilient business capable of driving shareholder returns.

Stefan Bombard, CEO, Imperial Brands

“This performance is underpinned by targeted investments in capabilities and people. Earlier this month we opened a new innovation facility in Liverpool, which brings together consumers, product developers and third-party partners in a single collaborative space. We are making good progress in our programs to modernize legacy systems, and we continue to invest in upskilling our leaders to drive forward our performance culture.

“We remain on track to deliver the acceleration in adjusted operating profit growth in the second half in line with our guidance and expectations. I am confident the actions we have taken are creating a stronger, more resilient business capable of driving shareholder returns through a growing dividend and an ongoing share buyback.”

May 16, 2023

Imperial Launches Pulze 2.0 Heating Device

Imperial Brands has launched the first all-new upgrade of its Pulze heated tobacco device, as it continues to innovate to create more compelling, potentially reduced harm products.

Pulze 2.0 offers new levels of convenience with a compact all-in-one design and 25 or more sessions from a single charge.

Paired with Imperial’s iD sticks now available in 10 different flavors, Pulze offers an attractive, potentially less risky alternative to consumers seeking to switch away from combustible cigarettes, according to Imperial.

“Our consumer-centric approach to innovation is accelerating the pace of development across all categories,” said Andy Dasgupta, Imperial Brands’ chief consumer officer, in a statement. “Pulze 2.0 is another important milestone on Imperial’s journey to build a healthier future and offers consumers alternative ways to enjoy moments of relaxation and pleasure.”

Heated tobacco devices such as Pulze release nicotine and tobacco aromas without burning and producing smoke. This means that aerosols produced by Pulze contain substantially lower levels of harmful chemicals than those found in cigarette smoke, research shows.

Pulze 2.0 is being launched initially in four markets—Italy, Poland, the Czech Republic and Greece—and will be rolled out more widely across Imperial’s heated tobacco footprint in Europe during the remainder of 2023.

Heated tobacco forms part of Imperial’s multi-category approach to building a strong, focused next generation products business. The company has also recently unveiled major product innovations in vape, with the new Blu 2.0 and Blu bar devices, and modern oral with nine new varieties of its fast-growing Zone X brand.

The launch of Pulze 2.0 comes as Imperial CEO Stefan Bomhard and CFO Lukas Paravicini today present on the progress of the business’ transformation at the Consumer Analyst Group of New York conference in Boca Raton, Florida, USA.

The presentation by Bomhard and Paravicini starts at 4 pm EST. Participants can register here.

February 22, 2023

Andrew Gilchrist Joins Imperial Board

Andrew Gilchrist will join Imperial Brands’ board as a nonexecutive director effective March 1, 2023, according to a company press release.

Gilchrist, who was chief financial officer of Reynolds American Inc. until its acquisition by BAT in 2017, has two decades of operational and financial experience in the tobacco sector. At Reynolds, Gilchrist held a range of leadership positions, including chief information officer, chief commercial officer and business development director. Earlier in his career, he worked for BAT in marketing and planning roles.

Imperial Brands Chair Therese Esperdy said, “I am delighted to welcome Andrew to the board. As well as the combination of his commercial and financial experience across our industry, he has a proven track record of business development, strategic planning and business integration. These skills and capabilities will further strengthen the board’s effectiveness as we continue the transformation of Imperial Brands.”

Gilchrist will also join the audit committee and the people and governance committee effective March 1, 2023.

February 7, 2023

Imperial Picks Blue Yonder as Supply Chain Solutions Partner

Imperial Brands has selected Blue Yonder as its end-to-end supply chain solutions provider.

Among other things, Blue Yonder’s solutions will provide Imperial with a holistic and connected view of its end-to-end supply chain planning processes, offering strategic scenario planning, demand forecasting and supply chain and inventory optimization. Imperial will be able to evaluate and execute connected planning scenarios and use prescriptive recommendations to make more accurate inventory decisions to improve the customer experience.

“As our industry continues to evolve, so must our company, and supply chain is one of our core transformation areas. Our strategy is to drive an end-to-end supply chain integration across our planning, logistics and retail operations, and we have chosen to do this with Blue Yonder as our supply chain solutions provider,” Javier Huerta, chief supply chain officer at Imperial Brands, was quoted as saying in a Blue Yonder press note.

“Imperial was looking for a supply chain solutions provider to lead and transform their business. We are proud that they have chosen Blue Yonder to guide them on this journey,” said Phillip Teschemacher, Blue Yonder’s corporate vice president of manufacturing for EMEA.

January 10, 2023

Companies Strengthen Sustainability Creds

Leading cigarette makers are strengthening their sustainability credentials.

Philip Morris International, for example, recently announced new ambitions to “preserve nature” via biodiversity and water stewardship.

These ambitions include protecting nature by achieving no net loss on ecosystems connected to PMI’s value chain by 2033; contributing toward a net positive impact on nature by 2050; scaling solutions toward a positive impact on water resources, measured as volume of water optimized and restored, by 2033; and contributing toward a positive impact on water resources by 2050.

“As our new ambitions demonstrate, PMI understands that decarbonization, biodiversity protection, forestry management and water stewardship are deeply connected. We aspire to lead by example in the responsible and sustainable management of natural resources that can allow the promotion and protection of natural ecosystems,” said Jennifer Motles, chief sustainability officer, in a statement.

PMI’s strategies to “tackle climate change” and “preserve nature” have been recognized by CDP, a not-for-profit charity that runs a global disclosure system for investors, companies, cities and regions to manage their environmental impacts. On Dec. 13, 2022, PMI received the Triple A score for its efforts across climate, forests and water stewardship.

Imperial Brands, meanwhile, recently received a CDP Climate A score for a fourth successive year. The company has committed to reaching science-based net zero emissions by 2040 through a five-step approach outlined in its 2022 annual report. Earlier this year, the business was named as a Supplier Engagement Leader by CDP for a third successive year and as a Climate Leader by the Financial Times.

“There is no other path than for all companies, all governments and all of society to pull together and get behind the decarbonization commitments that have been made,” said Tony Dunnage, global ESG (environmental, social and governance) director at Imperial, in a statement. “Our A score reflects our commitment to reducing our impact on the climate throughout our value chain, and we know that we can make a meaningful contribution.”

Imperial was also rated A- by CDP for water security—an improvement on the B rating achieved a year earlier—and a C for its first response in a number of years to the forests survey.

Japan Tobacco, too, has strengthened its commitment to sustainability. The company has been included in the Dow Jones Sustainability Asia-Pacific Index (DJSI Asia-Pacific) for the ninth consecutive year.

The DJSI is a globally recognized ESG stock index and sustainability benchmark that tracks the stock performance of the world’s leading companies in terms of governance and economic, environmental and social dimensions, with constituents selected on the basis of the S&P Global Corporate Sustainability Assessment. The DJSI Asia-Pacific is an index of companies in the Asia-Pacific region, which is reviewed once a year and whose constituents are selected from approximately 600 major companies in the region.

“We are honored that this year, again, JT has been selected in the DJSI Asia-Pacific,” said JT Senior Vice President and Chief Sustainability Officer Hisato Imokawa in a statement. “We believe that our inclusion in the index for the ninth consecutive year is the recognition of our earnest efforts to address ESG issues across our value chain. We are committed to promoting transparent and accurate disclosure of nonfinancial information, which has been a vital part of our agenda in recent years, and we recognize
that this is an important initiative to promote stakeholder engagement and dialogue.”

December 14, 2022

Bristol Mayor Vetoes ‘Navy Cut’ Road

Bristol Mayor Marvin Rees vetoed naming a South Bristol road after a tobacco product following pushback from Action on Smoking and Health (ASH), reports Bristol Live.

The road was set to be named Navy Cut Road after a brand produced by the Imperial Brands tobacco factory that formerly occupied that area. After ASH said that was “morally unacceptable,” however, Rees vetoed the name in favor of naming the road after Florence Mills Brown, the first female lord mayor.

Councilor Richard Eddy criticized the move, saying that Mayor Rees is “imposing” his will on the citizens of the area.

“Having served on Bristol City Council for 30 years, it does not escape me that, contrary to all previous practice, your team is not seeking the views of my local community and its elected councilors on a proposed street-naming within my neighborhood,” Eddy wrote in an email.

“Whilst I’m sure former Lord Mayor Florence Brown was a creditworthy woman, why name a road here after a Labour politician who represented two wards miles away in North Bristol and has no discernible links to Bishopsworth?

“This is not just a small disagreement over street naming in a southern city suburb, but it goes to the heart of the debate about whether Bristol should be ruled by one man with a ‘God complex’ or whether local communities and their duly elected councilors should determine their own destinies.”

December 8, 2022

Bomhard: Imperial Gaining Traction

Imperial Brands reported net revenue of £32.55 billion ($38.93 billion) for its fiscal year 2022, which ended Sept. 30. The figure was down 0.7 percent from 2021. Operating profit declined 14.7 percent to £2.68 billion. On an adjusted basis, net revenue was up 2.7 percent to £7.79 billion while operating profit increased 3.5 percent to £3.69 billion.

Imperial Brands insisted its five-year strategy is on track and delivering improved operational performance. The company’s aggregate market share in its top-five combustible markets was up 35 base points, reflecting Imperial’s first annual share gain in more than five years. Net revenue from next-generation products was up 11 percent driven by market launches in all categories. The company also reported increased shareholder returns with 1.5 percent growth in dividend enhanced by an ongoing £1 billion share buyback.

“In line with our five-year strategy, increased investment and a more consumer-centric approach have improved delivery in both our priority combustible markets and our next-generation product operations,” said Imperial Brands CEO Stefan Bomhard in a statement. “At the same time, disciplined capital allocation has strengthened our balance sheet to reach our target leverage. This has enabled us to enhance shareholder returns through an ongoing share buyback program alongside a progressive dividend.

“In tobacco, a sharper focus on brand building and sales execution has supported aggregate market share gains in our top five priority markets. Price mix improved in the second half, helping to offset the anticipated acceleration in volume declines, which occurred as borders reopened, prompting a return to pre-Covid buying patterns.

“In NGP, successful consumer trials have validated our approach, and we are now stepping up investment in new product and market launches across all three product categories. Our heated-tobacco proposition, Pulze and iD, continued to perform well in our pilot markets of Czech Republic and Greece, and we have recently launched in Portugal, Hungary and Italy, the largest European market for this category. Following the successful French trial of our new vapor device, Blu 2.0, we have now launched in the U.K. In modern oral, we expanded our range of flavors for Zone X in key markets and successfully introduced the Zone X format into Norway.

“Looking ahead, we are well positioned to deliver against the next phase of our five-year strategy. The additional investment and the actions we have taken during the initial two-year strengthening phase have built stronger foundations as we face into a more challenging macroeconomic environment. We are well placed to build on our track record of delivery over the next three years, improving returns and creating sustainable growth in shareholder value.”

November 15, 2022

Shares Sold in Imperial’s Former Russia Unit

Russian businessman Sergei Katsiev has acquired a 15 percent stake in International Tobacco Group, the former Russian subsidiary of Imperial Brands, reports Interfax, citing data from the Unified State Register of Legal Entities (USRLE).

In March, Imperial Brands announced that it was suspending operations in Russia, including production at its factory in Volgograd, sales and marketing, in response to Russia’s military assault on Ukraine. In April, the company said it had transferred its business in Russia to local investors.

Earlier this year, Imperial Tobacco Sales and Marketing and Imperial Tobacco Volga were renamed International Tobacco Group and International Tobacco Group Volga, respectively.

According to the USRLE, Nikolai Tyaka owns 75 percent of International Tobacco Group and International Tobacco Group Volga.

Following the Feb. 24 invasion, international cigarette manufacturers announced they would end their operations in Russia, but retreating from such a major market is easier said than done. Tobacco companies have had to carefully navigate shifting regulations and avoid missteps that could prompt the government to seize the business, for example—all the while trying to protect employees from becoming targets for arrest.

Tax payments by the leading international cigarette manufacturers have provided the Russian government with at least $7.25 billion in additional income since President Vladimir Putin ordered his army to attack Ukraine, according to an analysis of Russian Treasury figures conducted by The Telegraph.

Because Russia and Ukraine were relatively small markets for Imperial Brands, representing around 2 percent of net revenues and 0.5 percent of adjusted operating profit in 2021, the company may have found it easier to extract itself from Russia than some of its larger competitors.

November 9, 2022

Imperial Launches Blu 2.0 in U.K.

Imperial Brands has launched Blu 2.0, a new vaping device that replaces its existing Myblu system, in the U.K., reports The Grocer.

According to Imperial Brands, the new product offers a smoother and richer vaping experience due to its ceramic heating pod technology, which replaces the previously used cotton wick option. It also features a longer-lasting battery and bigger 1.9 mL volume liquid pods.

The new device also comes with a magnetic lock feature and “power tap,” which enables users to easily check the battery level.

Imperial has also launched a new range of six flavored liquids for use with the system: Golden Tobacco, Polar Menthol, Fresh Mint, Berry Mix, Blueberry Ice and Fresh Mango. All come in 9 mg and 18 mg nicotine strength variants.

“Through the launch of Blu 2.0, we’ve developed a product that looks better, tastes better and lasts longer than before to provide consumers with the next-generation vape product they’re looking for,” said Tom Gully, Imperial Tobacco’s head of consumer marketing for the U.K. and Ireland.

October 31, 2022

Imperial Announces Share Buyback

Imperial Brands has announced the start of a multi-year share buyback program.

The company intends to repurchase up to £1 billion ($1.12 billion) of shares between Oct. 7, 2022, and the end of September 2023. This would represent approximately 5.5 percent of the issued share capital of Imperial Brands based on the Oct. 5, 2022, market close.

“The launch of our new buyback program is an important milestone in our five-year strategy announced in January 2021,” said Imperial Brands CEO Stefan Bomhard in a trading update. “Over the past two years, increased investment and a more consumer-centric approach have improved delivery in both our priority combustible markets and next-generation product operations. Disciplined capital allocation has strengthened our balance sheet to reach our target leverage levels.

“Today’s announcement is underpinned by this improving performance and our confidence in being able to continue generating strong cash flows to support growing shareholder returns in the years to come,” Bomhard added. “We are committed to a progressive dividend and an ongoing buyback program to meaningfully reduce the capital base over time.”

According to Imperial Brands, trading in the year has been in line with expectations. Targeted investment in the company’s five largest combustible markets (which account for around 70 percent of operating profit) has driven an improvement in aggregate market share.

A stronger price mix accelerated the growth rate of tobacco net revenue at constant currency exchange rates in the second half of fiscal 2022. The recovery of international travel has led to a return to pre-Covid purchasing patterns, with increased volume declines, particularly in Northern Europe, partly offset by volume growth in Southern Europe and duty-free.

Imperial Brands reported good progress in implementing its refreshed next-generation product strategy. The company’s Pulze and iD tobacco-heating products debuted in Italy, Europe’s largest heated-tobacco market, while gaining market share in Greece and the Czech Republic. The company says its new Blu 2.0 pod-based vapor device was well received during a consumer trial in France.

Imperial Brands will report its annual results for the year ended Sept. 30, 2022, on Nov. 15, 2022.

October 6, 2022

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