Philip Morris buys e-cigarette maker Nicocigs as it warns of falling profits

Illustration a woman smokes an e-cigarette on April 2, 2014 in London, England (GETTY IMAGES)

Philip Morris has snapped up one of Britain’s fastest-growing electronic cigarette-makers, Nicocigs, as it warned profits from its traditional business will be lower than expected.

Nicocigs, was founded in 2008 and is based in Birmingham, is best known for its Nicolites brand.

Philip Morris, the owner of Marlboro, said the acquisition will give it “immediate access to, and a significant presence in, the growing e-vapour category in the UK market, as well as a strong retail presence”.

Nicocigs has about 27 per cent of the UK’s e-cigarette market, which has an estimated total retail value of $350 million (£206 million). The start-up employs 40 sales staff and distributes to 20,000 stores in Britain.

The purchase price for Nicocigs was undisclosed. The company reveals few financial details but it had amassed shareholder funds of £7.7 million by August 2013, according to Companies House. Nishil Nathwani, 27, is the leading shareholder.

The deal comes as Philip Morris, the world’s biggest tobacco firm, cut its profits forecast by about 4 per cent to between $4.87 and $4.97 per share on poor sales and price-cutting in Australia.

The stock fell nearly 2 per cent in trading on the German stock market. Chief executive André Calantzopoulos warned that the firm faces “significant currency headwinds … and known challenges in Asia”.

Calantzopoulos said the advent of e-cigarettes and other “reduced-risk” products means the tobacco industry is at “the early stage of a transformational process”.

Philip Morris reckons it could make $700 million of profit from “reduced-risk” products if it can reach a target of selling 30 billion units. But it also said it will run up $495 million in redundancy costs in September as it stops production in the Netherlands.