Update: Imperial Tobacco's Q3 Earnings

| About: Imperial Brands (IMBBY)
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Imperial Tobacco's Q3 earnings statement has confirmed my position the stock is a BUY and HOLD play.

Slight volume and revenue decrease was anticipated due to overall tobacco sales in decline.

Acquisition of Blu was a welcome surprise that was not mentioned in previous article and only adds to the BUY opinion.

A 10% dividend increase was expected in previous article as the company is "committed to maximizing shareholder returns by growing dividends by 10%+ a year."

Since my very first article on Seeking Alpha, Imperial Tobacco Group (ITYBY) has gained 11.30% YTD while my entry point at the low in February has gained 17.26%. The company currently represents 10.30% of my portfolio.

On the 19th August, the company released an interim management statement for the nine months ending June 30th. Looking at the volumes 91.7 billion cigarettes were sold for a 1% decrease with net revenue of £4,752m for a further 1% decrease compared to the previous year. While any negative number looks disappointing, this is actually beating the overall decline in the tobacco industry which is seeing close to a 3-4% decline in volume.

I went over the recent merger of Reynolds American (NYSE:RAI) and Lorillard (NYSE:LO) in my previous article, and how it could have benefited UK rival British American Tobacco (NYSEMKT:BTI) which I also happen to own. Needless to say I was pleasantly surprised that Imperial Tobacco Group was able to acquire the #1 e-cigarette brand Blu, as the merging companies felt they had enough exposure through their e-cigarette brand Vuse.

Though acquiring Blu was the highlight of the deal made by the companies mentioned, Winston, Kool and Salem will make excellent additions to Imperial Tobacco's growth and specialist brands. The Logista spinoff to the Spanish Market was part of the transition plan I mentioned in my previous article; the company now expects to save $100m for the year up from $49m last year.


Imperial Tobacco continues to be a great play for dividend growth investors as the stock currently offers a dividend yield of over 4% and the company has maintained its position on increasing the dividend by at least 10% for the financial year. This would give a dividend of around $4.10, based on the current share price of $86.54 this represents a dividend yield of 4.73%.

Disclosure: The author is long ITYBY, BTI.

The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: All information has been taken from the Interim Management Statement that has been linked in the article.

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