Smokers in the debt-laden countries of southern Europe are consuming ever more smuggled, fake and roll-your-own cigarettes, according to the latest quarterly update from Imperial Tobacco.
The maker of JPS, West and Lambert & Butler cigarettes and Golden Virginia and Drum rolling tobacco, said its volumes fell by 7 per cent in the nine months to the end of June, a sharper fall than the 6 per cent reported at the half year.
But the City was relieved that the declines had not been worse and Imperial shares jumped to the top of the FTSE 100 leaderboard with a rise of 55p to 2,209p. Some investors had actually feared a profits warning.
The chief executive Alison Cooper said: "We continue to focus on maximising opportunities for our total tobacco portfolio in the EU against a backdrop of weak industry volumes and are driving good in-market performances in Asia-Pacific and Africa and the Middle East, with our share improving in many markets."
Spain was the weakest of the European Union nations, with continuing public-sector spending cuts, rising unemployment and smuggled cigarettes from eastern Europe.
Imperial has a strong position in rolling tobacco and the relatively new make-your-own sector where smokers assemble their own branded cigarettes by packing tobacco into ready-made tubes. However, both forms sell for much less than cigarettes, which in volume terms still dominate.
The company said the nine-month picture confirmed its expectations for the full year but analysts pointed out that this included £30m this year from its plans to make annual savings of £300m from September 2018.
Ms Cooper said: "I'm pleased with the significant progress we're making with the strategic transition of the business, which is strengthening our sustainable sales growth capabilities and optimising our costs in line with our strategy.
"While opportunities to grow sales in the short term are being impacted by the environment challenges, we remain focused on generating high-quality returns and sustainable growth from our portfolio."
Imperial also said it was on track to launch its own e-cigarette some time next year through its e-vapour offshoot Fontem Ventures. Its rival British American Tobacco launched its Vype e-cigarette commercially this month.
Imperial said its logistics business was still under pressure because of fewer cigarette shipments.
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