Imperial bets on vaping devices for future growth prospects

While the traditional cigarettes market is seeing a decline, the sale of vaping pens and heated tobacco devices are on the rise.

On Tuesday, British tobacco company Imperial Brands stated, it expects vaping pens and a heated tobacco device to add up to $2 billion (1.5 billion pounds) to its revenues by 2020.

The tobacco industry is increasingly relying on new generation products (NGP) as its growth engine since sales of traditional cigarettes are now in the decline.

While regulators continue to scrutinize new products closely, with some viewing them as a healthier alternative to traditional cigarettes, others worry that the trend could get a new generation hooked to nicotine.

Imperial, the maker Winston, Gualoises, and Kool cigarettes, made its forecast ahead of an event on Tuesday that it said would focus on its NGP business.

In 2016-2017, Imperial had posted net revenues of 7.8 billion pounds in its core tobacco business; it expects its revenues to reach its full-year results in line with its forecasts.

“Our NGP ambitions are reflected in our management incentives to deliver compound annual revenue growth of 35-150 percent over the three years to FY20”, said Imperial in a statement. It went on to add, the NGP business could begin to contribute significantly to its total profit by the end of its 2019 financial year.

With the news reaching the market, Imperial’s shares were up by 1.7% in early trading.

As part of its blu e-cigarette brand, Imperial has been rolling out new vaping devices, including one called Pulze which heats rather than burns tobacco like traditional cigarettes. The Pulze will compete with similar devices from rivals such as Philip Morris and BAT.

“Imperial is our top pick in tobacco and currently trades on trough multiples as the group nears the end of its multi-year transformation into a focused brand builder,” wrote Liberum analysts said in a note to clients while adding that the company had the intellectual property, people and brands to take share in the fast-growing vaping market.

According to Imperial’s estimate, the e-cigarette market could exceed $30 billion by 2020, from its current market share of $4 billion.

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