Tobacco giant's stock crashes on vaping crackdown warning

Oscar Williams-Grut
Senior City Correspondent, Yahoo Finance UK
A man uses a vape as he walks on Broadway in New York City, US. Photo: Andrew Kelly/Reuters

Shares in tobacco giant Imperial Brands (IMB.L) crashed by 10% on Thursday after it warned of a slowdown in the US vaping market.

Imperial said that revenue growth was set to be slower than expected this year due to the “challenging” US vaping market and changes in Africa, Asia, and Australia.

“Whilst this is disappointing for the current year, we believe that NGP [next generation products] provides a significant opportunity to deliver additive growth to complement our Tobacco business,” Imperial said in a statement.

Imperial owns brands like Lambert & Butler cigarettes, Rizla rolling papers, and Golden Virginia tobacco. It’s “next generation products” include vaping product Blu.

Imperial said “environment has deteriorated considerably over the last quarter with increased regulatory uncertainty, including individual US state actions.”

Regulators in the US have been cracking down on vaping amid reports of deaths potentially linked to the tobacco alternative. Earlier this month Donald Trump announced that the US Food and Drug Administration would ban all flavoured vapes and last week the Centre for Disease Control and Prevention advised people to avoid vaping until possible health risks were better understood.

“This has prompted a marked slowdown in the growth of the vapour category in recent weeks, with an increasing number of wholesalers and retailers not ordering or not allowing promotion of vaping products,” Imperial said on Thursday.

READ MORE: Cigarette giant behind Lucky Strike cuts 2,300 job amid shift to vaping

Nicholas Hyett, an equity analyst at investment platform Hargreaves Lansdown, said: “Vaping’s only a small contributor to revenues and profits at the moment, which is why full year earnings per share look set to come in flat year-on-year, but hopes had been high that the vaping segment would drive growth as traditional tobacco declines.”

Imperial is not the only company to have suffered from the US vaping crackdown in recent weeks.

The CEO of Juul, America’s biggest vaping company, resigned earlier this week as the company agreed to stop marketing, amid pressure over its marketing to teens.

Tobacco giants Philip Morris (PM) and Altria (MO), which owns 35% of Juul, also ended merger talks on Wednesday. Analysts said the vaping crackdown was likely a factor in ending the $200bn deal.

“It is not a good time to be a vaping company,” Russ Mould, investment director at stockbroker AJ Bell said. “Political and regulatory pressures are coming down hard on the sector.

“While the public has been slowly switching from cigarettes to smoke-free products, there is a growing negative backlash in other circles caused by concerns over the large number of younger people vaping and the potential health threats.”