2011 Results of Imperial Tobacco Ukraine, Investing in Development

05.03.2012

For Imperial Tobacco Ukraine, 2011 was a period of active investments in the development of the company and its projects. More than 410 million hryvnias were invested in the modernization of production and technical facilities of Kyiv Tobacco Factory, implementation of various projects aimed at protecting the company’s tobacco products from illegal distribution, and of programs on social partnership with the Kyiv community.

The largest-scale investment projects that focused on company development include the introduction and commissioning of new production lines. Significant investments were aimed at renovating equipment for cigarette production quality control, since the company’s internal requirements concerning the quality of tobacco products envisage compliance not only with national but also with international standards. To protect its products from illegal distribution, a project was successfully implemented on introducing a system for monitoring the movement of products from the producer to the end consumer, preventing illegal sales of the company’s products both in and outside Ukraine.

The total volume of Imperial Tobacco Ukraine’s production in 2011 was 21.6 billion cigarettes, 1.2 billion of which were exported. 2011 production performance was by 10% less than the production volume in 2010, reflecting general trend of reducing legal tobacco market. The scale of illicit trade in Ukraine – contraband and counterfeit – continue to grow, causing significant loss of excise revenue to the state budget and the risks to consumers associated with poor quality of illegal tobacco products.

The company’s average annual market share increased by 0.75pp, reaching 22%. The company strengthened its market position in premium segment cigarettes: Davidoff – to 1.7% of the market (0.7 pp more compared to December 2010), and the Style brand – to 1.6% (0.39 pp more).  Further growth was demonstrated by such cigarette brands as Prima Sribna and Prima 83. The key event in the development of Imperial Tobacco Ukraine’s products portfolio was the introduction of an innovative product, West Compact.

Imperial Tobacco continues to hold leading positions among the largest taxpayers in Ukraine. In 2011, the company paid 3,927 million hryvnias in taxes and mandatory payments to the budgets of all levels, or 269 million hryvnias more compared to the previous year.

During the previous year, 27 new workplaces were created in Imperial Tobacco’s operating divisions in Ukraine and about 10 million hryvnias were spent on the improvement of working conditions, rehabilitation of employees and their family members, etc.

Following the high standards of corporate responsibility, the company takes an active part in the life of the capital city and its community, since the company’s production facilities are based in Kyiv. Imperial Tobacco launched a long-term social partnership program called Kyiv Is Our City, within the framework of which it invested more than 300,000 hryvnias in the development of the exposition of the М.М. Hryshko National Botanical Garden and support of the М.Т. Rylskyi Kyiv Literature Memorial Museum.

Eugene Walsh, General Manager of Imperial Tobacco Ukraine:

Our approach to how we run our business is based on a responsible attitude to all aspects of our activities – from the production and distribution of products to our employees and the region where we work. This responsibility-based principle determines the vectors of our development regardless of the year and market situation.

Unfortunately, the tobacco business today faces numerous challenges, the largest of which is the growth of volumes of illegal products. And one of our main tasks, as before, is protection of the legal market from the consequences of smuggling and counterfeiting.