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Pain in Spain hits profits at tobacco giant Imperial

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Imperial Tobacco has been hit by a combination of new anti-smoking regulations, increased competition and tough conditions for consumers.

The Bristol-based company is one of the largest in the world and, like other big tobacco producers, it has seen its revenues fall in recent months.

As a result of the tough conditions the firm, which owns the Davidoff cigarettes and Gauloises brands, has seen a fall in cigarette sales over the last three months.

There was a marked fall in the key Spanish market during the first quarter of the year, though the company insists the decline is slowing. Imperial issued a profit warning as a result of a price war with main rivals BAT and Philip Morris, revealing in November, that its full-year operating profit in Spain had fallen by more than a quarter to £200 million.

Imperial Tobacco said underlying sales fell seven per cent in the final quarter of 2011 as a result of sanctions in Syria, the problems in Spain and de-stocking following a price rise in the US.

But revenues were down one per cent as it benefited from price rises and the sale of more expensive products.

And in the UK it has seen strong demand for its value brands, including JPS and Windsor Blue, and a rise in demand for fine-cut tobacco as customers turn to rolling their own to save money.

Imperial also reported strong growth in emerging markets, where sales of Cuban cigars rose 14 per cent, while its key brands of Davidoff, Gauloises Blondes, West and JPS, have seen 10 per cent sales growth.

Shares in the world’s fourth largest tobacco group were up two per cent after chief executive Alison Cooper said it remained on track to meet its targets for the year to the end of September.

But Martin Deboo, an analyst at Investec Securities, said the seven per cent worldwide sales decline was worse than City expectations.

Imperial claimed the underlying decline was one per cent when events in Syria, US, Spain and the Ukraine were stripped out, but Mr Deboo said he was not convinced these were one-offs.

The company has been dealt a further blow over the introduction of anti-smoking regulations in Scotland.

Imperial lost its appeal against the introduction of a ban on the display of cigarettes in shops.

It was unanimously dismissed by three senior judges at the Court of Session in Edinburgh.

The company’s civil action, which also opposed a ban on tobacco vending machines, delayed the implementation of the Scottish Government’s measures.

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