Silk Cut-maker says Irish volumes up
01/03/2006 - 10:00:09Silk Cut maker Gallaher lifted annual profits by 2% today but warned the tough conditions impacting its European division were likely to continue.
European earnings before interest, taxes and amortization was £194m (2004: £197m), reflecting reduced volumes as a result of substantial market declines in a number of EU markets, Gallaher said today.
However, the group said the total cigarette market in Ireland increased by 1.8%, partly assisted by the phasing of trade sales ahead of price increases.
Gallaher estimates that the underlying market was broadly flat in Ireland, reflecting a return to more stable market conditions following the initial nine-month impact of the ban on workplace smoking that was introduced in March 2004.
Gallaher is the cigarette market leader in Ireland, with a share of 49%, buoyed by the 20.4% share held by Benson & Hedges Gold.
European earnings before interest, taxes and amortization was £194m (2004: £197m), reflecting reduced volumes as a result of substantial market declines in a number of EU markets. These declines were, however, partly offset by price increases and the volume growth in Ireland and in a number of central and eastern European markets, notably in the Czech Republic, Hungary, Romania and Slovakia, Gallaher said today.
Gallaher employs 79 people in Dublin.
The group said its cigarette volumes declined by 6.1% on the continent, reflecting factors such as increased taxation, workplace smoking bans and lower tourist volumes.
Austria, Germany, Italy and the Benelux countries were the hardest hit while in the UK the performance was more resilient with Gallaher’s sales slightly better than the 4% decline seen in the overall market.
Across the group, sales were 1.2% higher at £8.21bn (€12bn) with the figure for the UK showing a slight decrease to £3.66bn (€5.4bn), a fall partly reflecting the trend for consumers to switch from higher-priced brands into the value sector.
Operating profits from the UK were down by £6m (€8.8m) at £284m (€417.5m) with the bottom-line group figure up by 2.2% at £516m (€758.6m).
Gallaher said current trading in the UK remained in line with expectations, with the group forecasting a “modestly negative” impact from next year’s proposed smoking ban in public places in England and Wales.
The company was more cautious about prospects in continental Europe, where it said challenging conditions made the outlook for its tobacco operations appear less certain. Shares fell slightly following the update.
Gallaher is the fifth largest international tobacco company in the world – and the fourth biggest in Europe (based on billions of cigarettes sold each year).
Every second of every day, over 5,000 people somewhere in the world light up a cigarette made by Gallaher, the company says on its website.
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