Imperial's 1H confirms its ability to outperform

MORNINGSTAR VIEW: The tobacco firm's first half supports our thesis that the group is likely to outperform peers in difficult times

Philip Gorham, CFA 2 February, 2010 | 5:06PM
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In an interim statement for the first half of fiscal 2010, Imperial Tobacco revealed a positive performance that supports our thesis that the firm is likely to outperform its peers in difficult economic environments. We are maintaining our 1,751p fair value estimate.

As European smokers continued to feel the pinch of the slow economy, Imperial's positioning in value categories allowed it to grab market share. Spain was a weak spot, however, with industry volume falling around 10%, and we expect high unemployment in that country to continue to accelerate volume declines through the rest of fiscal 2010. In Imperial's other core markets, we expect to see a stabilisation in industry volume declines for the rest of the year. As the economy recovers, however, we anticipate that the premium products of rivals such as British American Tobacco and Philip Morris International will more effectively exploit any trading up by European smokers.

Read our full analyst report on Imperial here.

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Philip Gorham, CFA  Philip Gorham, CFA, is an associate director of equity research for Morningstar.

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