Summary of Imperial Brands Conference Call Company Overview - **Company**: Imperial Brands - **Industry**: Tobacco and Next-Generation Products (NGP) Key Points and Arguments Investment Proposition - Imperial Brands focuses on sustainable value generation from its tobacco business, which has shown consistent profitability without losing market share. Key markets include the U.S. and Germany, which together account for half of the company's profit, with Spain as the third-largest market. Africa contributes 10% of operating profit and is experiencing growth [2][3][5]. Next-Generation Products (NGP) - The company has successfully doubled its NGP business over the last five years, achieving double-digit growth in categories such as nicotine pouches, vape, and heated tobacco. The goal is to maintain this growth trajectory over the next five years [3][4][5]. - A consumer-centric approach is emphasized, with a focus on understanding consumer needs and preferences to drive innovation in NGPs [4][26]. Financial Guidance - Imperial Brands projects net revenue growth of 1%-2% from tobacco, complemented by double-digit growth in NGPs, leading to an overall operating profit growth of 3%-5%. The company aims for high single-digit earnings per share (EPS) growth and plans to return GBP 2-3 billion to shareholders annually through dividends and share buybacks [4][5][12]. Tobacco Market Dynamics - The company does not provide specific volume guidance but emphasizes the importance of pricing power to offset volume declines. Recent trends show a decrease in tobacco volume declines, improving from -7% in 2023 to nearly flat in the latest period [12][14]. - The affordability of products in key markets (U.S., Spain, Germany) supports pricing strategies, allowing the company to maintain profitability despite volume challenges [15][16]. Regional Insights - The U.S. market has shown a 4.6% net revenue growth, driven by strong pricing and growth in nicotine pouches. The company remains optimistic about the U.S. market's potential due to its affordability and diverse product offerings [18][19]. - Africa is highlighted as a growth area, with strong performance in markets like Ivory Coast and Burkina Faso, contributing significantly to operating profit [23][24]. NGP Strategy - Imperial Brands is focused on a differentiated NGP strategy, entering markets only when the category is established. The company aims for double-digit growth in modern oral products and heated tobacco, with specific growth expectations outlined for different categories [25][30][39]. - The company has launched innovative products like the Zone nicotine pouch, which has gained market share in the U.S. [31][30]. Regulatory Environment - The company is accustomed to navigating regulatory changes and has adapted its product offerings in response to regulations, such as the shift from disposable to rechargeable vaping products in the UK and France [34][36]. - Ongoing discussions regarding the European Tobacco Products Directive are monitored, with the expectation that any significant impacts will be felt towards the end of the current five-year plan [42][44]. Capital Allocation and Shareholder Returns - Imperial Brands has committed to a capital allocation strategy that prioritizes investment in the business, with plans for GBP 600 million in cash investments to enhance agility and consumer focus. The company also plans to maintain a progressive dividend and return surplus capital to shareholders through share buybacks [52][55]. Market Mispricing and Risks - The market may underestimate Imperial Brands' ability to generate cash from its combustible business while building a meaningful NGP business. The leadership team is confident in their plans, although external crises could pose risks to achieving their 2030 targets [61]. Additional Important Insights - The company has undergone significant leadership changes, with a focus on integrating technology and data to enhance consumer engagement and operational efficiency [4][8]. - The transition to a more agile, data-led organization is seen as crucial for future growth and competitiveness [46][49].

Core Points - The Colombian Ministry of Finance and Congress have resumed discussions on tax reform, focusing on adjustments to consumption tax rates and the elimination of certain fuel taxes while increasing taxes on alcohol, tobacco, and digital services [1] Group 1: Tax Reform Proposals - The original plan to impose a fuel tax aimed at generating 26 billion pesos (approximately $69,500) has been removed from the proposal [1] - The tax rate on digital services provided by foreign platforms will increase from 3% to 4.5%, and small imported goods will gradually be subject to value-added tax (VAT) [1] - Consumption tax on tobacco products will be expanded to include e-cigarettes and heated tobacco products, with annual adjustments based on inflation [1] Group 2: Impact on Specific Sectors - The consumption tax for the restaurant industry will also be increased in phases [1] - To promote regional tourism, hotels in towns with populations under 200,000 will receive a four-year VAT exemption, allowing related businesses to benefit from refunds and compensations [1]

Group 1: Consumer Strategy and Investment Recommendations - The investment opportunities in consumer sectors are divided into new consumption and dividend+consumption dimensions. New consumption saw strong excess returns in Q2 2025, but in July, market focus shifted due to high expectations and emerging sectors like PCB and innovative drugs, leading to a significant decline in stock prices [2][8] - The next systematic allocation for both new consumption and dividend+consumption is expected around late August during the intensive disclosure period of mid-year reports, with the outcome of US-China tariffs on August 12 indicating the next consumption allocation direction [2][8] Group 2: Light Industry Manufacturing - New tobacco products are showing a steady upward trend, with HNB products reaching 5 billion units in H1 2025, a 29.5% year-on-year increase. BAT's HNB revenue is expected to accelerate in the second half of the year [16] - The home furnishing sector is stabilizing at the bottom, with weak domestic sales but potential growth for resilient soft furniture companies [17] - The paper industry is also stabilizing, with inventory trends indicating a gradual decrease, although prices remain flat due to weak downstream demand [17] Group 3: Textile and Apparel - The apparel sector is experiencing mixed results, with a 1.9% year-on-year increase in retail sales in June, influenced by various factors. Focus is recommended on unique alpha companies and those with significant advantages in sub-sectors [20] - The export sector is recovering, aided by reduced tariffs from the US, although uncertainties remain in US-China tariff negotiations [20] Group 4: Beauty and Personal Care - The beauty sector is facing a decline in retail sales, with a 2.3% year-on-year drop in June. Recommendations include focusing on leading companies with stable mid-year performance and those with significant rebound potential [21] Group 5: Home Appliances - The home appliance sector is seeing a slight decrease in production, with a total of 26.97 million units produced in August, down 4.9% year-on-year. Notably, the global TV shipment volume decreased by 1.5% in the first half of the year, with domestic brands showing growth [22][23] Group 6: Retail and E-commerce - The retail sector is under slight pressure, with supermarkets and department stores facing challenges, while e-commerce is stabilizing at the bottom. Yonghui's recent fundraising plan aims to reduce debt and improve operational efficiency [24] Group 7: Social Services - The tea beverage sector remains high in demand, benefiting from delivery subsidies, while the restaurant industry is stabilizing. The tourism sector maintains high demand, and the education sector shows resilience [25]