Imperial sees modest full-year earnings growth

(Adds company comment, detail)

LONDON, Aug 19 (Reuters) - Imperial Tobacco (LSE: IMT.L - news) said it expected modest earnings growth in the current financial year thanks to a slight upturn in Europe's cigarette market.

The maker of Davidoff and Gauloises cigarettes said sales volume for its top-growth brands grew 3 percent in the nine months to June 30.

Underlying net revenue rose 2 percent to 4.75 billion pounds. On a reported basis, factoring in the impact of foreign exchange swings, revenue fell 1 percent.

"The market as a whole has slightly improved in the past quarter," Imperial said in a statement. "Although we have seen a modest deceleration in the rate of market decline in parts of Europe, this has been offset by a significant deterioration in the Russian market and the impact of the turbulent situation in the Middle East."

It said the markets in which it operates were shrinking at an annual rate of about 4 percent.

Taxation and regulation of cigarettes are increasing in many countries and tobacco companies like Imperial are moving quickly into the e-cigarette market.

Imperial is set to become the world's third-biggest cigarette company in the United States, and the leading e-cigarette maker in the country, after it agreed last month to buy some assets from Reynolds American (NYSE: RAI - news) and Lorillard , which are merging.

Imperial reiterated a plan for a 10 percent increase in its dividend and said a cost cutting programme was on track to deliver incremental savings of 60 million pounds for the year. (Reporting by Martinne Geller and Kate Holton; editing by Tom Pfeiffer)