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Imperial Brands warns of e-cigarette crackdown hit on earnings

By Elena Berton

The tobacco giant expects lower demand from the partial US ban on vaping devices coming into force this week

Tobacco giant Imperial Brands warned that the US crackdown on e-cigarettes and weaker consumer demand will hit annual revenues and profits.

The news pushed shares in the maker of Gauloises cigarettes and Blu vaping brand 7.9 per cent lower, the biggest loser on the FTSE100 index in mid-day trading.

In a trading statement, Imperial Brands said the US ban on certain flavours of vaping devices, which goes into force this week, had resulted in a write-down of its stocks at a cost to full-year profit of about £45m ($58.7m, €53.17m).

Due to the expected slower consumer demand, Imperial Brands now forecasts net revenue will be flat and adjusted earnings per share will be slightly lower than last year.

Imperial Brands added that a cost-saving plan to mitigate these issues would have an impact of around £40m on adjusted full-year profit.

It said that talks to sell its cigar business remained ongoing, adding it is continuing to consider divesting other "non-core" operations.

Tobacco firms such as Imperial have branched out into vaping as a safer alternative to traditional tobacco products, whose sales have been shrinking due to health concerns and marketing restrictions.

But a backlash against these products as young people embraced fruit-flavoured e-cigarettes has led to increased regulatory scrutiny.

Imperial Brands bought e-cigarette brand Blu, then a market leader in the US, from US tobacco company Reynolds in 2015. However, it has struggled to rebuild the distribution networks and retail relationships that Blu had enjoyed as part of the Reynolds group.

This week the company appointed Stefan Bomhard as its new CEO to replace Alison Cooper, who was ousted in September.

FURTHER READING: Vaping deaths: what does it mean for the e-cigarette industry?

FURTHER READING: British American Tobacco sees growth despite slowing US vaping market

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