Imperial Brands, a major tobacco company known for Winston cigarettes, has announced plans to increase dividends to its shareholders following a significant growth in sales of e-cigarettes and alternative smoking products. The company is set to raise the amount of cash returned to shareholders from £2.4 billion to £2.8 billion in the upcoming year.
The surge in sales is attributed to the success of innovative products in the e-cigarette and next-generation smoking categories. These products include vapes, heated tobacco, and oral nicotine pouches, all designed to provide nicotine without the harmful effects of tobacco smoke. While Imperial Brands still generates most of its revenue from traditional cigarettes, it has seen a boost in sales through price increases.
Despite a general decline in smoking rates, the company has observed a slowdown in this trend over the past year across its key markets. Net revenue from next-generation products is anticipated to have grown by 20% to 30% in the year ending September, driven by the introduction of new and improved products like the Blu vape brand and alternative tobacco sticks.
As part of its commitment to adapting to changing regulations and consumer preferences, Imperial Brands has intensified its efforts in developing alternative smoking products. This move aligns with global initiatives to regulate cigarette use, with discussions even underway in the UK about potential outdoor smoking bans in public spaces.
Derren Nathan, head of equity research at Hargreaves Lansdown, highlighted the company’s success in bolstering growth not only in next-generation brands but also in traditional tobacco products. While the decline in smoking rates has eased in key markets, challenges persist, particularly in maintaining market share in countries like Germany and the UK.
In a bid to reward its shareholders, Imperial Brands has announced a 14% increase in share buybacks amounting to £1.25 billion, along with a substantial cash dividend of approximately £1.5 billion. This move has resonated positively with investors, reflected in a nearly 4% increase in the company’s share price on Tuesday.