Imperial Brands: Structural Headwinds Back in H1 FY23

Company Update (IMB LN) (Neutral)

Highlights

• Tobacco volume fell by 6.8% globally and by 8.7% in Europe

• Europe EBIT declined again, having fallen in 3 of the last 4 years

• Adjusted EPS fell 1.2% year-on-year excluding FX and Russia

• NGP were just 3% of revenues and have low market share

• IMB will be the key loser in the market shift to NGPs. Avoid

Introduction

Imperial Brands (“IMB”) reported H1 FY23 (October-March) results this morning (May 16), having already released headline numbers in a pre-close update on April 13. Shares finished the day down 1.8% in London.

We have been consistently cautious on IMB, calling it the “worst of the big 4 Tobacco stocks” when we started publishing our research with a Neutral rating back in July 2019. The share price is still lower after nearly 4 years.

H1 FY23 results how weak IMB earnings can be once the benefit from COVID-19 and lower Next Generation Products (“NGP”) investments has dissipated. Excluding currency and Russia, Adjusted EPS fell 1.2% year-on-year, and the increase in NGP losses…