Imperial profits to be fired up from abroad (fwd)

[Robert Weissman <rob@essential.org>]

November 26, 1999

Imperial profits to be fired up from abroad

LONDON, Nov 26 (Reuters) - Britain's Imperial Tobacco Plc is set to report a
jump of
over 20 percent in annual profits next Monday, driven by a strong rise in
overseas earnings
and one-off stock profits in the UK, analysts said on Friday.

They say Imperial will have seen strong growth from its international
businesses, particularly
in Africa, and further benefits from the acquisition of Dutch hand rolling
tobacco company
Van Nelle Tabak made in July 1998.

In addition, the surprise immediate implementation of a duty rise in the UK
March budget will have allowed Imperial to sell
stockpiled cigarettes with duty paid at old rates at the new increased
prices helping to boost UK profits.

The group which makes Embassy, John Player and Lambert & Butler cigarettes
in Britain, is expected to show a rise in pre-tax
profit to 396-406 million pounds from 325 million in the year to
end-September when it reports on November 29.

They see a full year dividend of around 26-28 pence a share after a previous
shareholder payout of 23.4p, from the group
which was demerged from Hanson in October 1996.

Imperial shares have outpaced the FTSE Tobacco Index by 36 percent over the
last year, but have still managed to
underperform the FTSE All Share index by 10.5 percent. They were up three
pence at 675p by 1015 GMT.

Analysts said that Imperial's international profits will have risen over 25
percent, its Rizla tobacco paper business by over 10
percent, while it will see a full year contribution from Van Nelle compared
to just three-month previously.

Future earnings from abroad will increase further after it completed a deal
in Australasia in September, towards the end of its
financial year. It made a 130 million pound acquisition of a number of
brands in Australia and New Zealand from British
American Tobacco Plc (quote from Yahoo! UK & Ireland: BATS.L), giving
Imperial a 17 percent share of the Australian cigarette
market.

The brands came up for sale as a condition of BAT's takeover of Rothmans
which was completed in July.

Analysts estimate this Australian deal will push Imperial's earnings from
abroad to around 46 percent from its current 40
percent and is the major reason for its higher market rating than major
British rival Gallaher Group Plc (quote from Yahoo! UK &
Ireland: GLH.L) of which the UK still accounts for over 80 percent of
profits.

Gallaher's desire to diversify abroad was highlighted by a move earlier this
month to consider an offer for French rival Sieta ,
maker of Gauloises and Gitanes cigarette, and break up Seita's planned
merger with Tabacalera .

Analysts said the March UK budget put 18p on a 20-pack of cigarettes, and
with December's rise from the 1998 budget put
39p on a pack in four months. Imperial said a 5 pence a packet manufacturers
price rise in July will have helped UK profits.