Smoking ban sends Imperial on foreign mission

Imperial Tobacco is looking to spread its wings into high-growth markets in eastern Europe and the US as fewer consumers in the UK and Germany buy cigarettes.

The world's fourth-largest cigarette company has continued to grow market share in its core markets as more customers turn to its budget brands Lambert & Butler, Richmond and Windsor Blue. Yet, with the smoking ban set to come into effect in England next summer, Imperial is looking at its growth options in new regions. The company hopes to capitalise on its premium brands such as Davidoff and West as it increases its presence in countries such as Russia.

The company established a manufacturing plant in Turkey last year and has taken a 1.5 per cent market share in the world's sixth biggest cigarette market.

Gareth Davis, the chief executive, said he would prefer to grow the company via large acquisitions but that "there is not much on the radar at the moment".

There are six large global players in the cigarette sector and Mr Davis said he expects consolidation over time. Imperialhas been linked with a bid for Altadis, the maker of the Gauloises and Fortuna brands, but Mr Davis declined to comment on any impending moves for Imperial's rival. In the meantime the company will continue its share buyback programme.

A company spokesman said that a move into the US, the second-largest market for cigarettes, should be expected within 18 months if its application to sell cigar-ettes there is successful.

Imperial celebrated its tenth anniversary since the company's flotation and demerger from the Hanson conglomerate with strong full-year results. Although revenues rose a modest 1 per cent to £3.2bn it re-corded an 8 per cent rise in profit before tax to £1.2bn.

The company sold 187bn cigarettes during the year - a 7 per cent increase on the year despite declining volumes in western Europe. As a result of the success of Lambert & Butler and Richmond - the two biggest-selling brands in the UK - it increased its UK market share to 45.5 per cent.

The company also makes Embassy, Regal and Superking cigarettes, Golden Virginia and Drum rolling tobacco and Rizla cigarette papers.

Mr Davis is expecting the introduction of a smoking ban in English pubs to have a more subdued effect than in Scotland and Ireland. He said that when the ban in England begins next sum-mer many smokers will be using beer gardens or outdoor areas. The introduction of the smoking ban in Scotland resulted in a 5 per cent decline in cigarette volumes, Mr Davis said, but in recent months the gap with the rest of the UK has narrowed to around 2 to 3 per cent.