Imperial Forecasts Costs of $281 Million on Altadis
March 19 (Bloomberg) -- Imperial Tobacco Group Plc, the maker of Davidoff and West Cigarettes, said costs related to its takeover of Altadis SA will lop 140 million pounds ($281 million) from the current fiscal year's profit.
March 19 (Bloomberg) -- Imperial Tobacco Group Plc, the maker of Davidoff and West Cigarettes, said costs related to its takeover of Altadis SA will lop 140 million pounds ($281 million) from the current fiscal year's profit. The expenses concern the value of inventory, elimination of inter-company sales and depreciation adjustments, Imperial said today in a statement. Sales are meeting its forecast so far in the year, according to the Bristol, England-based company. Imperial, Europe's second-largest publicly traded cigarette maker, bought Altadis to become less reliant on the shrinking U.K. and German markets. Western European tobacco companies are making acquisitions to cut costs and expanding elsewhere as governments in the region toughen restrictions on smoking. The maker of Lambert & Butler said today it remains ``very confident of achieving'' forecast annual cost savings of 300 million euros ($473 million) from buying Madrid-based Altadis by the close of the fiscal year ending in 2010. Imperial also said it will continue a partnership between Altadis and Cuba's government for selling cigars made in the country. Davidoff Cigarettes will go on sale in the U.S. in coming weeks after registration delays, Chief Executive Officer Gareth Davis said. A slowdown by the country's economy, the world's largest, may cause a ``slight'' downturn in the premium cigar market as consumers opt to spend less, he said. Asset Sales Tobacco and cigar assets whose disposal has been ordered by the European Commission as part of the takeover have drawn interest from ``a number of parties,'' Davis also said. The assets should be sold in coming months, according to the CEO, who spoke at an analyst meeting made available on the company's Web site. Imperial rose 61 pence, or 2.7 percent, to 2,325 pence in London, the biggest gain since Jan. 31. The shares have slid 14 percent this year, More than the 4.4 percent drop by larger rival British American Tobacco Plc, the maker of Pall Mall Cigarettes. Sales of Altadis assets worth 650 million euros had raised 331 million euros by the end of last month, the statement shows. Most of the remainder consists of real estate, the bulk of which should be sold by September 2009, Imperial said. It generated 275 million euros separately by selling the Spanish cigarette maker's stake in airport retailer Aldeasa SA. The Altadis costs will cut first-half profit from operations by about 110 million pounds and lower second-half earnings by 30 million pounds, according to Imperial. The expenses will have no effect on its ``underlying business performance'' or cash flows, the statement shows. Gauloises Imperial paid 12.6 billion euros for Altadis, the maker of Gauloises Cigarettes and world's biggest cigar producer, and completed the purchase in January. The Spanish company gets most of its sales from its domestic market and France. In connection with the takeover, Imperial has offered 910 million euros for full control of distributor Compania de Distribucion Integral Logista SA, of which it owns about 59 percent after buying Altadis. Logista transports Cigarettes and other goods from magazines to pharmaceuticals in southern Europe. Imperial plans to sell shares worth as much as 5 billion pounds to current investors ``as soon as possible'' and before July 18 at the latest, Chief Financial Officer Bob Dyrbus said. The company plans to update investors beforehand on Altadis's performance and also must complete its Logista bid, he said. Davis forecast a ``minimal'' increase in tobacco leaf costs over the coming one to two years, which will be ``quite easily offset with extremely modest price increases.'' Smaller Markets Gains by the pound should give a ``modest'' boost to profit this fiscal year, Dyrbus said. The U.K. cigarette market contracted 4 percent by volume in 2007, Imperial said in January, after England banned indoor smoking in public places. The German market shrank by almost 6 percent after taxes rose. Imperial accounts for almost half of the British market and about a fifth of that in Germany. Imperial forecast an eventual slowing in the rate of decline in the U.K. to between 1 percent and 2 percent. The western European cigarette market will shrink by 1 percent to 2 percent over coming years, Philip Morris International said yesterday. The contraction has slowed following smoking bans and tax increases that cut into consumption in past years, PMI executives said. Tobacco use will kill 1 billion people this century, a 10- fold increase over the previous 100 years, unless governments in poor nations raise taxes on consumption and mandate health warnings, the World Health Organization said in February. To contact the reporter on this story: Thomas Mulier in Madrid at [email protected].