Imperial Tobacco reports 40% profit surge

Imperial Tobacco today reported a 40% leap in half-year profits driven by its acquisition last year of German cigarette maker Reemtsma.

Pre-tax profits for the six months to the end of March were £377m, ahead of the £353m-£368m forecast by analysts.

Imperial, the world's fourth-biggest tobacco firm, which makes West and Embassy cigarettes, and owns the Dutch Van Nelle hand-rolling tobacco business and Rizla cigarette papers, said cost savings were flowing from the May 2002 Reemtsma purchase.

UK profits, however, were down to £177m from £188m last year - due largely to increased marketing spend before a ban on tobacco advertising began in February, and the shrinking domestic cigarette market - but Imperial said it had increased its market leadership in Britain from 42% to 43.8% over the year.

The performance of two low-priced brands - the top-selling Lambert & Butler and fast-growing Richmond brand - was largely behind the increase.

Reemtsma's German market share had stabilised at 20% after years of decline, the company said.

Chief executive Gareth Davis told the Reuters news agency that the Imperial had already delivered cost savings of £45m from the Reemtsma deal, and was on track for savings of £140m for 2003 and at least £170m for 2004.

Both shares in Imperial and the Gallaher Group, also a tobacco manufacturer, have outperformed the FTSE-100 index by 35% over the last 12 months.

Imperial shares dipped 0.5% to 1021-1/2 pence after recovering from a low of 879p in February.