Imperial Tobacco Group PLC Thursday declared that it expects its tobacco products revenue to increase this year, as tobacco companies continue to depend on arising tobacco markets growth and price increases to compensate stagnant consumer demand. The world’s fourth-largest tobacco company by cigarettes sales, manufacturer of Davidoff and JPS brands, reported that it sees revenue increase approximately 4 per cents at current currency rates.
But total stick volumes, which combine cigarettes and fine-cut tobacco, are expected to decline by up to 3%, hit by weakness in Ukraine and Poland and a trade ban in Syria, it added in a notice.
Global tobacco companies have been raising prices regularly all over the world for to protect their margins as demand decreases. Imperial, Philip Morris International Inc. PM +0.14% , British American Tobacco PLC and Japan Tobacco Inc. account for approximately three quarters of the total tobacco market excluding China, where state-controlled China National Tobacco Co. has a virtual control.
Even though tobacco product is relatively resistant to economic afflictions, the giants are increasingly turning to Asia, Africa, Eastern Europe and the Middle East for growth opportunities, as declines and government severe measures force consumers in the West to cut back on spending or switch to cheaper cigarette products and roll-your-own tobacco products.
Imperial, in particular, has a high exposure to Europe, which accounts for more than half its income, with the U.K. and Germany its biggest tobacco markets. Last year, its trading was hit by a price war in the beleaguered Spanish economy.
Imperial had a hard start after first-quarter revenue and volumes were affected by the tobacco trade ban in Syria, a price raise in the U.S. and stocking issues in Ukraine. The company’s first-half net profit, reported in May, was also hit by higher taxation and one-off finance items, although revenue increased. In July, the tobacco company reported that it had momentum as nine-month revenue rose and volume decline moderated.