Imperial Brands' (IMBBY) restructuring hit ahead of new EU rules on cigarette sales overshadowed solid full-year earnings Tuesday but some investors may be ignoring underlying strengths in the world's third-largest tobacco firm.
Shares in the owner of Kools and Blu e-cigarettes fell 2.55% by mid-day in London, making it the biggest decliner on the benchmark FTSE 100 index as market share losses, a £750 million restructuring charge and the looming implementation of plain-packaging regulations across parts of Europe eroded sentiment.
But investors might be overestimating the impact of a push toward mandatory plain-packaging in Europe and underestimating longer term tax-driven affordability risks in some key markets.
Imperial delivered an in-line performance against consensus for the full-year: net revenues were up 9.7% in constant currency terms, at £7.16 billion ($8.9 billion) while adjusted operating profit jumped 16.1% to £3.36 billion.
But Imperial lost 50 basis points of market share in its 'growth markets' and also said it experienced further share losses in the U.K. and Germany and management booked the £750 million restructuring charge in its effort save £300 million per year and fund future investment.
"We have established an excellent platform for sustainable quality growth, which will continue to provide growing returns for shareholders," CEO Alison Cooper said.
The frosty response from investors comes as the U.K., France, Ireland and other European nations gear-up to make plain-packaging mandatory for all cigarette sales next year - a move feared by firms given that it could restrict their ability to build and market brands.