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Imperial Tobacco says weak sales in Russia are harming business. Photograph: Martin Rickett/PA
Imperial Tobacco says weak sales in Russia are harming business. Photograph: Martin Rickett/PA

Imperial Tobacco hit by weak sales in Russia and Middle East unrest

This article is more than 9 years old
Davidoff and Gauloises cigarettes maker says shrinking markets and currency swings are harming global sales

Imperial Tobacco, the world's fourth-largest cigarette company, has been hit by weaker sales in Russia and unrest in the Middle East.

The maker of Davidoff and Gauloises cigarettes blamed tough conditions in a number of its key markets, highlighting "a significant deterioration in the Russian market and the impact of the turbulent situation in the Middle East".

Russians are among the heaviest smokers in the world – with around 400,000 people dying of smoking-related diseases each year according to official figures – but the government has been clamping down on the habit. A ban on smoking in bars and restaurants came into force in June, as well as restrictions on selling cigarettes on street kiosks. At the same time, Imperial has been hit by unrest in the Middle East, as suppliers struggle to deliver cigarettes in Iraq and Syria.

Imperial said its markets are shrinking by around 4% a year, although some of its best-selling brands continue to grow.

Total sales continue to decline in Europe, as smoking bans and graphic health warnings contribute to a decline in the number of smokers, but Imperial said it had seen "a modest deceleration in the rate of market decline in parts of Europe".

Imperial Tobacco reported a 1% fall in revenue to £4.8bn for the nine months to the end of June, as it was hit by adverse swings in foreign exchange. The company is only the latest FTSE 100 member with a global business to feel the strong pound weighing on profits – rival British American Tobacco reported last month that profits were down 9% on currency fluctuations.

In a trading statement, Imperial also promised to update shareholders on the $7.1bn (£4.3bn) deal it struck last month to buy American cigarette brands, including Winston, Maverick and blu e-cigarettes, from two US tobacco companies, Lorillard and Reynolds, who are merging. The deal, which is expected to be complete in 2015, will catapult Bristol-based Imperial into the No 3 spot in the US market.

Imperial launched its first e-cigarette in Britain this year – a device named Puritane that is made by its subsidiary Fontem Ventures and sold in pharmacists.

The arrival of big tobacco companies into the e-cigarette market has alarmed health campaigners who fear the devices "renormalise" smoking rather than help people quit. More than 100 public health experts recently urged the World Health Organisation to bring e-cigarettes under the same tight controls as tobacco products, with bans on advertising and promotion.

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