New CEO Gives Imperial Tobacco Boost for Future

Imperial Tobacco is at a structural disadvantage to its bigger rivals, but the firm has strong competitive advantages and a good future ahead of it

Philip Gorham 26 August, 2015 | 1:38PM

Under CEO Alison Cooper, Imperial Tobacco (IMT) is slowly transforming from an also-ran – albeit a highly profitable one – to a significant player and potential consolidator in the global tobacco industry. But despite recent value-creating acquisitions in the United States, we think there is more work to do, and of the three wide-moat European cigarette manufacturers we cover, we prefer the competitive positioning of Philip Morris International and British American Tobacco due to their superior scale.

It remains at a cost disadvantage to its larger rivals

We attribute a portion of Imperial's lower returns on invested capital, averaging almost 17% over the past five years, lower than peers, to the firm's capital-intensive logistics business, which is a drag on ROIC and masks the highly profitable tobacco business, with margins in line with those of its larger competitors.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Rating
British American Tobacco PLC3,242.00 GBX-0.96
Imperial Brands PLC1,488.50 GBX-1.06
Philip Morris International Inc73.51 USD-0.54

About Author

Philip Gorham  

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