Imperial Tobacco sees 2007 in line; tight-lipped on Altadis move UPDATE

Imperial Tobacco sees 2007 in line; tight-lipped on Altadis move UPDATE

	Published : Wed, 21 Mar 2007 11:22 By : Agencies Print this Story

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LONDON (AFX) - The world's fourth biggest cigarette maker Imperial Tobacco Group PLC, which last week initiated a long-anticipated attempt to buy rival Altadis SA, said it sees 2007 results fully in line with management's expectations.

The group, which made no reference to the takeover approach in an annual trading statement, added that it is seeking additional annual cost savings of around 30 mln stg over the next few years.

It also announced the construction of a plant in Taiwan, costing 45 mln stg, which should be completed by 2008. Initially, annual production will be around 6 billion cigarettes, with primary capacity for 15 billion.

The move should generate annual savings of 20 mln stg in fiscal 2010.

'Our strategy continues to be to create shareholder value by growing both organically and through acquisitions,' the company said in the statement.

'Our focus on top line growth, cost efficiency and effective cash utilisation gives us confidence in delivering another record performance in 2007.'

Imperial will brief industry analysts on trading and regulatory matters at midday in London, and management is likely to be quizzed on the Altadis situation.

The world's fifth biggest tobacco group turned down Imperial's 45 eur per share approach last Friday, and the market is waiting to find out what UK company plans to do next. A raised offer is widely expected, while industry analysts are not ruling out the possibility of counter bids for either company.

Imperial, which has spent more than 6 bln stg on acquisitions since de-merging from former conglomerate Hanson ten years ago, would be able to strengthen its position in Western Europe, grow revenues and cut costs by merging with Altadis.

The Franco-Spanish group, which owns the Gauloises and Fortuna brands and has a significant cigar business, counts France and Spain as its main markets. Imperial, meanwhile, is very strong in its domestic market and Germany.

In today's trading statement Imperial said its market share in the UK, where the company generates 37 pct of its profits and sells the number one selling brand Lambert & Butler, climbed to 46.0 pct in February, up from 45.5 last September.

The company said duty paid cigarette market volumes fell by 1 pct in the first five months of its financial year. It expects that to drop to 3 pct across the full fiscal year, after the smoking ban is brought in.

In Germany, which generates a fifth of Imperial's profits, the white stick market declined by 5 pct in the five months. The company blamed the drop on a surge in cross-border trade prompted by a change in the tax regime on 'single' products.

Still, the group said a strong performance from its JPS brand helped volumes climb 8 pct, and market share grow to 21.0 pct, from 20.7 pct.

The group's 'Rest of Western Europe' region experienced an improvement in pricing, while the 'Rest of the World' region grew volumes by 6 pct.

Imperial made its first foray into the US earlier this year, with the acquisition of the country's fourth-biggest manufacturer Commonwealth Brands. The group said it is targeting an additional 50 mln stg profit in the US by 2009.

At 9.35 am, Imperial shares were little changed, trading 7 pence higher at 2,257. The stock has jumped 10 pct since it announced the Altadis offer, amid speculation the move may force the hand of Marlboro-maker Altria Inc, which has previously been linked to a bid for the British company.

amy.brown@thomson.com

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