Imperial Brands LON: IMB executives said the company has made a strong start to its 2026 financial year and its Strategy 2030 plan, with management emphasizing disciplined growth in next-generation products, continued value creation in combustibles and a multiyear efficiency program.
Speaking at a Deutsche Bank fireside chat, Chief Executive Lukas Paravicini said his first eight months in the role had been focused on visiting markets, meeting teams and consumers, and advancing the company’s “performing and transforming” agenda. He said Imperial had “a good start to 2026” and had reconfirmed guidance for double-digit growth in next-generation products, or NGP, for the full year.
Paravicini said the company’s transformation program has two main parts: self-help efficiencies and investments to bring Imperial closer to consumers through technology, including artificial intelligence. He reiterated the company’s commitment to deliver £320 million of cost savings.
Market Share Strategy Focuses on Value
Paravicini said market share remains an important metric for Imperial, noting that by the end of 2025 the company had gained 50 basis points of market share across its five key aggregate markets and 195 basis points in the United States. However, he said management is refining how it views market share, especially in markets such as the U.S., where profitability differs significantly by price segment.
“One volume share, one BPS volume share, is not equal,” Paravicini said, explaining that the company may choose not to invest heavily in lower-margin segments in a given year if pricing offers better long-term value.
In the U.S., Paravicini said Imperial has maintained share in Kool and Winston at the top end of the market, grown share in Crowns, and launched Malibu as a deep-discount offering. He said Malibu is not expected to become a large brand, but gives the company a base at the lower end of the market while allowing other brands, including Crowns and Sonoma, to be priced in line with the broader tobacco industry.
Paravicini also said the U.S. combustible market has improved compared with a year ago, citing volume declines of 5.5% rather than high-single-digit declines discussed previously, better vape enforcement and improved price elasticity.
Executives Review Key Regional Markets
Chief Financial Officer Murray McGowan said Germany has performed well after several years of share decline, supported by investment behind brands such as Gauloises and Davidoff at the premium end and Parliament at the lower end. He described Germany as a market with predictable pricing, a stable excise regime and high affordability.
In the U.K., McGowan said Imperial has prioritized value over share in a market that now accounts for around 3% of group volume. He said the U.K. remains one of Imperial’s top five markets but is less affordable because of high excise increases. He added that the company has a vaping share of just over 10% with blu and has recently launched in modern oral products.
McGowan described Spain as one of Imperial’s most affordable markets, with cigarette prices starting at about €5 per pack, compared with roughly £17 in the U.K. He said the company continues to invest selectively behind local brands such as Ducados and larger brands such as West.
Paravicini said Australia remains difficult following the country’s public health bill, with the market size down 50% in the first half. He said Australia remains profitable but has become much smaller, accounting for less than 1% of Imperial’s volume and less than 1.5% of sales. He said Imperial has shifted its Australian operating model from direct to hybrid and now indirect, while reducing its workforce there.
NGP Growth Remains a Priority
McGowan said NGP revenue grew 7.5% in the first half, and Imperial remains committed to double-digit growth for the full year. He said a one-off charge related to promotional activity around the company’s financial year-end affected first-half results and would not repeat.
In the U.S., McGowan highlighted continued growth in modern oral products and the recent acquisition of Black Buffalo. He said Black Buffalo targets users of moist smokeless tobacco by offering a tobacco-free alternative that recreates aspects of their existing habit.
In Europe, McGowan said Imperial is seeing good performance in vaping as consumers shift from disposables to pod-like systems. He also pointed to heated tobacco growth in Southern Europe, including Italy and Romania, modern oral performance in the Nordics, and heated tobacco performance in Central and Eastern Europe, including Poland, Hungary and the Czech Republic.
Paravicini said Imperial is taking a disciplined approach to heated tobacco, focusing on markets where it has a route to market and consumer traction. He cited Pulze 3.0 and related sticks as examples of innovation that has performed well in Italy, Central and Eastern Europe, and Greece.
Transformation Program Targets Cost Savings and Technology
Paravicini said Imperial’s efficiency program includes both manufacturing and non-manufacturing initiatives. He said the planned closure of the Langenhagen factory and the sale of the Taiwan factory are expected to be completed by the middle of next year and generate £100 million in savings.
He also said the company’s Manufacturing Excellence program is expected to generate £25 million of savings in 2026 through measures such as yield management, overall equipment effectiveness and labor efficiency.
Beyond manufacturing, Paravicini said Imperial is working with Capgemini to accelerate shared services and technology transformation. He said approximately 400 roles moved to Capgemini within two months of signing the contract, with a 99% retention rate.
Paravicini said the partnership could also support revenue growth by shortening innovation cycles and improving sales execution. He said an artificial intelligence tool used by the sales force in Italy and France has generated 10% to 15% time efficiency while helping sales representatives better prepare for customer conversations.
Cash Generation Supports Returns
McGowan said Imperial’s tobacco model remains highly cash generative, supported by pricing that offsets volume declines in most markets. He said the company spends about £350 million annually investing in the business, maintains net debt to EBITDA between 2 and 2.5 times, supports a progressive dividend and returns excess capital to shareholders.
McGowan said Imperial will complete a £1.45 billion share buyback this year. Since 2021, he said the company has returned about £11.5 billion to shareholders through dividends and buybacks, representing around 77% of its market capitalization at times.
He said management is confident in the company’s cash generation and its ability to sustain an “evergreen” share buyback through the current five-year plan, though future buyback amounts will be determined annually.
About Imperial Brands LON: IMB
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