Imperial Brands has warned that the ongoing Iran war could weigh on costs and consumer demand, as the FTSE 100 tobacco company navigates a more uncertain macroeconomic environment. Despite reporting a solid first half, the group noted that the conflict in the Middle East has not materially impacted results yet, but could pose risks going forward.
First Half Results
For the six months to the end of March, Imperial Brands reported group revenue of £14.7bn, up 0.8% year-on-year, driven by robust tobacco pricing and growth in Next Generation Products (NGP). Revenue from tobacco and NGP climbed 1.8% to £3.7bn, supported by increased demand for alternatives like vapes in Europe and Asia Pacific. Earnings per share rose 5.3% to 127.7p, and the company hiked its dividend by 4% to 83.3p per share.
Iran War Risks
The company stated: “While the conflict in the Middle East has resulted in a more uncertain macroeconomic environment, we have not seen a material impact to date. We will continue to monitor the situation. The longer this persists, the more likely there could be a more meaningful impact on input costs and consumer demand, including duty free.” Shares fell 0.6% in early trading to 2710p, and are down 13.2% since January.
NGP Growth
Imperial Brands reported market share gains across all NGP categories, including modern oral products, vapes, and heated tobacco. The group’s focus on reusable vapes and new product launches in Europe, the UK, and Nordic states helped drive growth. However, the NGP arm suffered £40m in operating losses due to global launch efforts.
Outlook
Imperial Brands expects low single-digit tobacco revenue growth and double-digit NGP growth for the full year, with profit growth of 3-5%. Derren Nathan of Hargreaves Lansdown noted: “With first half underlying operating profit up just 0.6%, there’s still work to do to hit the three to five per cent full-year target.”
