Imperial Tobacco scores in emerging markets

Nick Raynor, investment adviser at The Share Centre explains why today's update from Imperial Tobacco confirms his ‘sell' recommendation.

"Today's update shows that despite the developed world cutting back in the tobacco market, it is emerging markets and the US who are driving the growth in the sector.

"The UK and German markets report no change in sales. However, the introduction of the smoking ban in Spain has had a negative impact - since January 2011 sales are down 10%. With Russia considering introducing similar measures, there may be further declines on the horizon for Imperial Tobacco.

"As the developed world seemingly becomes increasingly health conscious, it is the emerging markets who are keeping sales above water.  As a result of these figures the share price has increased, demonstrating that the market possibly didn't factor in such good figures from the emerging markets sector.

"Despite the positive figures and today's increase in the share price, we believe this is only a brief respite for investors. As the global trend to reduce smoking gathers momentum and emerging markets become more educated and aware of the risks involved with smoking, this will have a long term detrimental affect on the tobacco sector. This is why we continue to recommend investors ‘sell' Imperial Tobacco."