In an interim
statement for the first half of fiscal 2010, Imperial
Tobacco revealed a positive performance that supports our thesis
that the firm is likely to outperform its peers in difficult economic
environments. We are maintaining our 1,751p fair value estimate.
As European smokers continued to feel the pinch of the slow economy,
Imperial's positioning in value categories allowed it to grab market
share. Spain was a weak spot, however, with industry volume falling
around 10%, and we expect high unemployment in that country to continue
to accelerate volume declines through the rest of fiscal 2010. In
Imperial's other core markets, we expect to see a stabilisation in
industry volume declines for the rest of the year. As the economy
recovers, however, we anticipate that the premium products of rivals
such as British
American Tobacco and Philip
Morris International will more effectively exploit any trading up by
European smokers.
Read
our full analyst report on Imperial here.
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