Release Date: November 19, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Imperial Brands PLC (IMBBF, Financial) reported a 4.6% growth in net revenue, driven by strong performance in both tobacco and next-generation products (NGP).
- The company achieved a 10.9% growth in earnings per share, supported by rising profits and a share buyback program that retired 11% of share capital since 2022.
- Imperial Brands PLC (IMBBF) has seen significant growth in its NGP segment, with revenue up in all three regions and categories, leading to reduced losses.
- The company has successfully stabilized or grown market share in its five priority markets, demonstrating effective brand strengthening and sales execution.
- Imperial Brands PLC (IMBBF) has committed to returning £10 billion to shareholders through buybacks and dividends over the five-year strategy period, reflecting strong cash generation and shareholder focus.
Negative Points
- The US market remains challenging due to market volume declines, although these were offset by strong pricing.
- Despite improvements, the NGP business still represents a single-digit percentage of overall net revenue, indicating room for growth compared to larger competitors.
- The company faces potential headwinds from foreign exchange translation, expected to be a 1-2% headwind to profit.
- There is ongoing pressure in the Australian market due to high excise taxes and increased illicit trade, impacting the legal market size.
- Imperial Brands PLC (IMBBF) acknowledges that the benefits of its transformation are still to come, indicating that full potential has not yet been realized.
Q & A Highlights
Q: Can you discuss the sustainability of the mid-single-digit organic growth drivers, such as performance culture and productivity savings?
A: (Unidentified_1) It's difficult to isolate the impact of individual drivers, but the fiscal '24 results build on previous years, showing broad-based performance delivery. We feel confident that our performance is underpinned by several elements, and we don't foresee any of them running out of steam. (Unidentified_2) Operational gearing, pricing ahead of volumes, and reducing losses are key levers. We continue to launch better processes and shared services, which will support future growth.
Q: What markets give you confidence in delivering aggregate market share growth, and can you elaborate on Germany's performance?
A: (Unidentified_1) Our strategic ambition is to hold share in our top five markets, and we've achieved this for four consecutive years. Germany's performance is particularly encouraging, as we've expanded our sales force and improved agility in targeting opportunities. While we don't take this for granted, it's a positive sign of our strategy's effectiveness.
Q: Can you comment on the capacity and PMTA status of the Zone product in the US?
A: (Unidentified_1) We're comfortable with our capacity for Zone, having invested in extra capacity from the start. Our PMTA for Zone was submitted before the deadline and accepted by the FDA. We're now waiting for feedback, along with other companies selling modern oral nicotine in the US.
Q: With the moderation in volume declines, how sustainable is high single-digit pricing in Europe and Ace?
A: (Unidentified_2) Pricing is a function of volume decrease, market share, and inflation. With inflation rates decreasing, we expect some easing of headwinds, including in the US. However, the US remains a profitable market, and we don't see pricing as an issue even if volume decreases persist.
Q: What has been the most surprising aspect of the strategy over the last four years?
A: (Unidentified_1) Three surprises include the positive reaction of our combustible brands to reinvestment, the successful reboot of our NGP business, and the rapid change in our organizational culture. These elements have contributed significantly to our strategy's success.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
