Imperial to close plants as EU newcomers cut taxes

Imperial Tobacco unveiled plans yesterday to axe 940 jobs in Central Europe in an attempt to prepare for the new wave of entrants to the European Union later this year.

The group said the fact that excise duties would vanish in Hungary, Slovenia and Slovakia on 1 May meant it no longer made commercial sense to continue manufacturing cigarettes locally. Until now, it has sought to avoid import duties of as much as 58 per cent by operating factories in all three countries. It plans to close those factories, as well as a filter factory in Hungary.

The move forms part of an overhaul by the chief executive, Gareth Davis, of its manufacturing portfolio, which has seen it shut factories and distribution outlets all over the world. Last year it closed a cigarette factory in Cambodia, a roll-your-own packing plant in the Netherlands and a distribution centre in Bristol.

"This restructuring is an important part of our drive to reduce over-capacity and maintain our competitive advantage," said David Cresswell, the manufacturing director. "Any announcement that involves job losses is regrettable."

The company said the factory closures would save it about £20m a year from 2005, but would force it to take a £35m hit to its bottom line in its current financial year to cover asset write-offs and the redundancy programme.

It said it would maintain the same level of sales and marketing activity in the three countries affected.

Yesterday's announcement brings the total number of job cuts at the world's fourth-biggest tobacco company to almost 2,000 since it took over the German cigarette maker Reemtsma in March 2002. Nine of the 13 factories it acquired as part of the deal will remain in operation following the central European closures, leaving Imperial with 32 sites worldwide. The plants in those three countries accounted for 6.5 per cent of the group's production of 220 billion cigarettes last year.

Hungary, Slovenia and Slovakia are among 10 countries, most in Eastern Europe, set to join the EU at the start of May.