Where next for Imperial Brands’ share price as US vaping crackdown hits revenues?

Imperial Brands’ share price fell more than 10% on Thursday after the company issued a profit warning amid threats of a regulatory crackdown on vaping products in the US.

The tobacco company said that ‘in light of challenging’ market conditions in the US, group revenues for the year are expected to grow at around 2% instead of the 4% it previously expected to achieve.

‘Whilst this is disappointing for the current year, we believe that next generation products provide a significant opportunity to deliver additive growth to complement our tobacco business,’ Imperial Brands said in a statement.

Vaping backlash bad news for big tobacco

The tobacco industry has invested heavily in next generation products (NGP) like e-cigarettes as a method of offsetting declining demand for traditional tobacco products.

But with the recent consumer and regulatory backlash brought about by a series of vaping-related illnesses that have claimed the lives of 11 people in the US, the industry is likely to see e-cigarette sales slump.

Earlier this month, the US Centers for Disease control and Prevention even went as far to tell the public to avoid using e-cigarettes altogether.

‘The US next generation products environment has deteriorated considerably over the last quarter with increased regulatory uncertainty,’ Imperial Brands said.

‘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.’

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Imperial Brands completes Auxly Cannabis deal

On Wednesday, Imperial Brands closed its C$123 million investment in Auxly Cannabis by way of a debenture, convertible into a 19.9% shareholding in the Canadian-based company.

‘We’re excited by the opportunities this partnership offers and look forward to working with Auxly to build its business and realize its significant future growth potential,’ Imperial Brands Corporate Development Director Conrad Tate said.

Imperial Brands is also in the process of divesting its premium cigar business, with the group on track to realise proceeds of up to £2 billion from its disposal programme before May 2020.