Imperial Brands(US:IMBBY)2021-11-16 13:10Financial Data and Key Metrics Changes - The company reported a net revenue growth of 1.4% at constant currency, with total volumes declining by 2.9% [26] - Tobacco net revenue grew by 1.5%, driven by a price mix of 4.4%, while excluding excise changes in Australia, tobacco net revenue grew by 2.7% [27] - Free cash flow was £1.5 billion, with a reduction in leverage and a 1% growth in the dividend [17][35] - Earnings per share (EPS) increased by 2.8% at constant currency, reflecting profit delivery and lower interest charges [34] Business Line Data and Key Metrics Changes - The Next Generation Products (NGP) net revenue was broadly stable, but grew by 8.6% when excluding market exits [28] - Adjusted operating profit grew by 4.8% at constant currency, impacted by various factors including lower stock profits in Australia and litigation charges in the U.S. [29] Market Data and Key Metrics Changes - The U.S. market represents about 35% of tobacco profit, with market share gains in the sub-premium segment and a 45% increase in mass-market cigar volumes [61][63] - In Germany, market share performance improved over the last four months, although the company lost share overall [65] - In Australia, the company adjusted prices to reflect brand equity, leading to share gains in the second half of the fiscal year [68] Company Strategy and Development Direction - The company aims to transform into a business capable of delivering reliable, attractive returns over the long term, focusing on five key combustible markets that generate around 70% of profits [4][8] - A new focus on consumer-centric strategies and a refreshed leadership team has been implemented to support operational improvements [12][13] - The company is committed to harm reduction through its NGP business, with a disciplined approach to investment and market entry [10][56] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the challenges posed by COVID-19 and regulatory changes but expressed confidence in the strategic focus on key markets [89] - The outlook for fiscal year 2022 includes expectations for net revenue growth similar to the previous year, with a focus on maintaining market share and improving operational performance [39][40] - Management emphasized the importance of a strong balance sheet and disciplined capital allocation as key priorities moving forward [38][85] Other Important Information - The company has committed to achieving net zero emissions by 2040 and has strengthened its ESG team to enhance sustainability efforts [58][59] - A restructuring program is in place to deliver savings and optimize the NGP business, with an annualized savings target of nearly £70 million by the end of fiscal year 2022 [31] Q&A Session Summary Question: Outlook for major markets post-COVID - Management indicated that predicting the impact of COVID-19 on volume outlook is challenging, with potential headwinds in the UK and Germany due to changes in consumer behavior and tax increases [89][90] Question: NGP losses and future expectations - Management expects NGP losses to continue declining in fiscal year 2022, with ongoing investments in testing and trials [92] Question: Confidence in mid-single-digit EBIT growth - Management expressed confidence in achieving mid-single-digit EBIT growth due to a strategic focus on key markets and improved market share performance [94][95] Question: E-cigarettes in the UK medicinal channel - Management is encouraged by the UK government's recognition of vaping as a smoking cessation tool and is evaluating participation in the medicinal channel for blu [99][100] Question: Progressive dividend policy - Management confirmed the commitment to a progressive dividend policy, emphasizing the importance of maintaining a strong balance sheet before considering capital returns [103][106]