Revenue Growth: Up 3.2%, driven by improvements in both tobacco and NGP businesses. Earnings Per Share (EPS): Increased by 6% due to growth in adjusted operating profit and share buyback programs. Dividend Increase: Up 4.5% on an underlying basis; interim dividend increased by almost 79% due to rephasing. Market Share Gains: 6 basis points gain in top five markets, with a notable 65 basis points gain in Germany. Adjusted Operating Profit Growth: Increased by 1.8%, supported by strong pricing and reduced losses in NGP. Free Cash Flow: GBP2.4 billion on a 12-month basis. Leverage: At 2.4 times, within target range. Tobacco Revenue Growth: Driven by strong pricing, offsetting volume declines. US Price Mix Increase: 10.1%, driven by pricing in cigarette and mass market cigar portfolios. Adjusted Effective Tax Rate: 23.5%, in line with full-year guidance. Share Buyback Program: GBP1.25 billion, a 14% increase over the previous year. NGP Revenue Growth: Continued growth across all three categories, with market share gains. Heated Tobacco Market Share in Italy: Reached 3.3% in the first half.

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Release Date: May 14, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

Imperial Brands PLC (IMBBF) reported strong top-line growth of 3.2%, driven by improvements in both tobacco and next-generation products (NGP). The company achieved a market share gain of 65 basis points in Germany, marking its first significant gain in this market in over a decade. Earnings per share increased by 6%, supported by buyback programs and strong operating profit growth. The interim dividend increased by almost 79%, reflecting the company's commitment to returning capital to shareholders. Imperial Brands PLC (IMBBF) is on track to deliver its full-year guidance, with consistent delivery against key metrics for the eighth consecutive half-year period.

Negative Points

The global economic outlook has become more uncertain, posing potential challenges for future performance. Tobacco volume declines were noted, with some markets experiencing elevated declines, such as the US. The company faces competitive pressures in certain markets, leading to strategic pricing actions that resulted in market share losses in the UK and Spain. Foreign exchange rates are expected to be a headwind, impacting net revenue and operating profit. The departure of key executives, including the CEO, raises concerns about continuity and potential risks in executing the company's strategy.

Story Continues

Q & A Highlights

Q: As you think through the next five years, should we expect continuity in the strategy and capital allocation framework? Also, how do you view tobacco volume declines? A: Lukas Paravicini, CFO, confirmed continuity in strategy and capital allocation, emphasizing the team's commitment to the current plan. Stefan Bomhard, CEO, noted that tobacco volume declines are stabilizing, with the US and Germany providing a strong market footprint to manage these changes effectively.

Q: In the US, there was impressive top-line growth, but operating profit growth was lower. Can you explain the dynamics between top and bottom line? A: Lukas Paravicini explained that while the US market showed strong revenue and market share growth, investments in NGPs, particularly in expanding store presence, impacted operating profit. The focus remains on maintaining a balanced portfolio across price points.

Q: Regarding Germany, after years of share losses, how should we think about future share gains? A: Stefan Bomhard expressed excitement over the recent market share gains in Germany, emphasizing a portfolio approach. While not promising continuous gains, the focus is on maintaining a balanced market share across key markets.

Q: Have you seen any improvement in the US illicit market environment? A: Stefan Bomhard noted that while there are improvements in areas where government action has been taken, the company remains cautious and does not rely on significant changes in the illicit market for its plans.

Q: Can you provide more color on the strong US pricing in H1 and the impact of mix? A: Lukas Paravicini stated that strong pricing drove results, with mix having a negligible impact. The focus remains on maintaining strong pricing across both mass market and premium segments.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.

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