Imperial Invests in Caffeine Products to Counter Smoking Slump -- Update

By Saabira Chaudhuri 

LONDON-- Imperial Brands PLC is investing in a caffeine-based, low-calorie product designed to give users a boost of energy as the tobacco company works to combat the impact of declining smoking volumes.

"We are increasingly looking into other areas where we can satisfy some of these other needs particularly from millennial consumers," Imperial's Chief Financial Officer Oliver Tant told reporters.

The remarks came as Imperial, which makes the JPS and Gauloises brands, said net profit rose to GBP675 million ($871 million) in the six months ended March 31 from GBP290 million a year earlier. Revenue rose to GBP14.3 billion from GBP12.81 billion.

The results were helped investment income, which rose to GBP730 million from GBP290 million a year earlier. Operating profit fell to GBP902 million from GBP1 billion.

Total tobacco volume fell 5.7% in the period to 126.3 billion sticks, a deterioration from the 3.1% decline seen a year earlier. Tobacco net revenue climbed 9.3% but dropped 5.5% at constant currency.

Imperial, the third-largest cigarette company in the U.S., said its Winston and Kool brands had increased market share over the half while mass market cigars are performing well.

Imperial in 2015 launched a trial version of the energy boosting product, called Reon, sold in Manchester and online that was designed as a strip intended to melt in one's mouth. Wednesday Mr. Tant said Imperial continues to invest in this product, which could be delivered through a variety of formats, including powders and liquids, but isn't yet looking to commercialize it.

U.K.-based Imperial's results come as the regulatory environment for traditional cigarettes continues to toughen. The country will later this month implement plain packaging, under which cigarettes will be sold in uniform packs stripped of distinctive logos and colors, and adorned with graphic health warnings. Australia and France also have plain packaging laws in place and other countries, such as Ireland and Hungary, are on a path to similar legislation.

On Wednesday, Imperial's Chief Executive Alison Cooper said the company is working to simplify its brand portfolio to better manage the impact of plain packaging but said Imperial has seen profit and sales growth in Australia despite the industry no longer having the ability to brand cigarette packs there after a law passed in 2011.

Imperial is on track to meet consensus analyst estimates for the full year, said Ms. Cooper. Analysts currently expect adjusted per-share earnings of GBP2.77 on tobacco net revenue of GBP7.9 billion.

Write to Saabira Chaudhuri at [e-mail]

(END) Dow Jones Newswires

May 03, 2017 04:10 ET (08:10 GMT)

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