UPDATE 2-Imperial H1 rises, looks to better second half

* H1 adjusted EPS up 16 pct to 83.2p vs forecast 81.4p

* Sees better second half with volumes stabile

* Sees improving share in emerging and mature markets

* Half-year dividend up 16 pct to 24.3p

(Rewrites with Chief Executive comments, analyst, details)

By David Jones

LONDON, April 27 (BestGrowthStock) – Britain’s Imperial Tobacco
(IMT.L: ), the world’s fourth-biggest cigarette maker, beat
forecasts with a 16 percent rise in half-year earnings and
looked towards a better second half as recovery kicks in.

Imperial, with cigarette brands including Lambert & Butler,
West and Gauloises, said on Tuesday it saw the downturn cut its
volumes 3.7 percent in the six months to end-March but price
rises in Western Europe pushed up overall sales and earnings.

The group expects its cigarette volumes will stabilise in
the second half of its year to end-September 2010 and expects to
be able to offset higher tobacco leaf cost by pushing up prices.

“Overall, we see a fairly strong second half, and are
encouraged by the upward trend of our most recent cigarette
shares in a number of mature and emerging markets,” Chief
Executive Gareth Davis told a conference call after results.

He added the volume decline was just 1.4 percent in its
second quarter (Jan-March) showing an improving trend which was
better than the 2.3 percent fall reported by the world’s largest
cigarette maker Philip Morris International (PM.N: ).

Marlboro-maker Philip Morris posted lower-than-expected
first-quarter profit (Read more your timing to make a profit.)s last week hurt by weak economies in parts
of Europe as it lost share in Germany and Greece.[nN22217718]

Imperial’s volumes were hurt by a tax rise last April in the
United States and as cash-strapped smokers downtraded to cheaper
cigarettes in Spain in the downturn and as unemployment rose,
but Davis said Spain was now beginning to recover.

“We continue to believe that Imperial can generate solid 6
percent underlying operating profit growth in its tobacco
operations – generally in line with the outlook for PM and BAT –
driving 2010 EPS growth of around 11 percent,” said analyst
David Adelman at brokers Morgan Stanley.

Imperial shares rose 1.6 percent to 19.78 pounds by 0730 GMT
after being under pressure since reported its volume decline in
March and fined 113 million pounds earlier this month in Britain
for price fixing, sliding from a high of 21.59 pounds in March.

The shares have underperformed the FTSE 100 index (.FTSE: ) by
6 percent and competitor British American Tobacco (BATS.L: ) by 8
percent so far this year. BAT reports its Q1 on Wednesday.

Imperial posted adjusted earnings for the half-year to
end-March of 83.2p a share compared to a consensus of 81.4p from
a Reuters survey of eight analysts. Earnings were boosted by the
weaker pound, cost savings from its 2008 Altadis takeover and
lower interest costs.

Its operating profits grew 6 percent to 1.45 billion pounds
and its net revenue was up 4 percent at 3.39 billion.

Imperial announced a half-year dividend up 16 percent to
24.3p in line with its policy of paying out a third of last
year’s 73p annual dividend, and in line with its long-term aim
to pay out 50 percent of earnings in dividends.

Davis is set to retire on May 12 after 14 years as chief
executive and will be replaced by his number two, Alison Cooper

Investment
(Reporting by David Jones)

UPDATE 2-Imperial H1 rises, looks to better second half