Imperial Brands PLC's shares fell more than 10% on Sept. 26 after the U.K.-based tobacco company lowered its sales and EPS forecast for fiscal 2019, citing the regulatory crackdown against vaping devices and e-cigarettes in the U.S.
The owner of Winston cigarettes and Rizla rolling paper now expects revenue growth of 2% for the year ending Sept. 30, down from the previous guidance of nearer 4%, the company said in a regulatory filing.
EPS is projected to be largely flat compared to its medium-term guidance for 4% to 8% growth.
The company said it expects its next generation products business, or NGP, which includes its Blu e-cigarettes, to grow net revenue by about 50% in 2019, below expectations.
"The USA NGP environment has deteriorated considerably over the last quarter with increased regulatory uncertainty, including individual U.S. state actions. This has prompted a marked slowdown in the growth of the vapor category in recent weeks, with an increasing number of wholesalers and retailers not ordering or not allowing promotion of vaping products," Imperial Brands said in a statement.
"As highlighted in May, we stepped up our retail engagement programs in the USA in the second half, alongside a significant increase in brand investment and stronger consumer promotions. This has delivered improving consumer off-take for Blu, albeit less than expected, reflecting the slowdown in the U.S. vapor category combined with increased competitor discounting. This has impacted overall group revenues and profitability."
Imperial added that it is "evaluating the effectiveness of our NGP supply chain, which may result in contract termination costs that are not included in our revised expectations."
The company added that its performance in Europe and the U.S. will "more than offset" tough trading conditions in its Africa, Asia and Australasia division.
Imperial Brands said it expects the full-year results to benefit from about £30 million of other gains this year, compared with £80 million last year. The company's cost optimization program is also set to save £300 million by September 2020.
Imperial Brands said the divestment of its premium cigar business has attracted several potential buyers. It remains on track to gain proceeds of up to £2 billion from its assets disposal program before May 2020.
In late morning trading in London, shares of Imperial Brands were down 10.1%, or 208.5 pence, at £18.57.
