Imperial Brands Faces Turbulence as CEO Steps Down
Imperial Brands shares experienced a notable dip of over 6%, sliding to £27.09 in early trading on May 14, 2025. The decline followed the announcement that Stefan Bomhard, the company’s CEO for the past five years, will be retiring. This transition opens a new chapter for the multinational tobacco giant, emboldened by its recent growth yet faced with market uncertainties.
Key Highlights
- Bomhard Retires After Five Successful Years
- Lukas Paravicini Takes the Helm as New CEO
- Shares Surge 44% Over the Past Year
Leadership Transition: A Dual Edge
Bomhard’s decision to step down has stirred mixed feelings among investors, even though Bomhard’s retirement was disclosed during a recent Imperial Brands investor event. His successor, Lukas Paravicini, the company’s current CFO, will officially assume the CEO role on October 1st. This straightforward transition aims to maintain stability in the company’s strategic direction.
What’s Next for Imperial Brands?
Imperial’s chair, Therese Esperdy, will continue to oversee the transition, ensuring consistency during this pivotal period. The leadership change comes at a time when Imperial Brands is preparing to unveil its full-year results, which analysts expect to align with current guidance, despite a more uncertain global economic landscape.
Share Performance and Market Position
Despite the recent news, Imperial Brands has demonstrated resilience with its shares climbing 44% over the last year, effectively bucking the trend of governmental crackdowns on smoking and vaping products. For the six months ending March 2025, the company reported a 3.1% decline in revenue, totaling £14.6 billion.
Strength in Strategy
While the traditional tobacco sector faces challenges, Imperial effectively grew its market share in its key territories. With a focus on price optimization, the company achieved a 5.9% increase in price mix across its combustible products. Moreover, next-generation products (NGP) emerged as a significant growth avenue, reporting a 15.4% revenue increase in expansion across various categories.
Looking Forward
Bomhard emphasized the robust growth of the company’s modern oral portfolio, particularly with the productive rollout of Zone in the U.S. markets. With a 12-month free cash flow of £2.4 billion, the company showcases a strong balance sheet and cash generation capability, achieving 99% cash conversion over the same period.
Analyst Insights: Transition and Future Prospects
Rae Maile, a research analyst at Panmure Liberum, remarked on the disappointment surrounding Bomhard’s retirement, highlighting his exceptional track record. “Lukas Paravicini is incredibly capable, and his promotion is well-deserved,” Maile stated, applauding the strategic continuity that underpins the company’s recent plans.
Russ Mould, an investment director at AJ Bell, noted that investor demand for Imperial Brands shares remains strong due to the company’s defensive qualities amid economic unpredictability. However, news of Bomhard’s retirement, coupled with slightly lower-than-expected profit growth, has jolted the share values.
Conclusion: A New Era Awaits
Since Bomhard took the reins in July 2020, he has strategically focused on the company’s core strengths in traditional tobacco while ensuring substantial cash returns to shareholders. With over 100% total returns since his leadership commenced, the focus now shifts to Paravicini as he navigates Imperial Brands through the complexities of the current market landscape.
Disclaimer: Financial services company AJ Bell referenced in this article owns Shares magazine. The author and editor have disclosed their ownership of shares in AJ Bell.
Issue Date: 14 May 2025
