Imperial Brands’ new boss was given a fresh headache on Wednesday before his start date was even set, as the company warned of an earnings fall.
Hit by a clampdown on vaping in the US, both from government and from people, Imperial now expects a 10% fall in first-half earnings per share, when stripping out the effect of currency changes.
The news will pose a challenge to Stefan Bomhard, Imperial’s new chief executive who does not even have a start date yet.
He takes over from Alison Cooper, who stepped down on Monday when Mr Bomhard was announced.
The company cited the US Food and Drug Administration’s (FDA) ban on flavoured vape pods as the main reason for the earnings drop, as it forced the business to write down its inventory.
Imperial has bet heavily on the vape market, launching blu, a vape pen that uses the type of cartridges.
Under new rules, which come into effect on Thursday, shops will be banned from selling any flavoured vape pods other than menthol and tobacco.
It came after a series of deaths which are thought to be related to vaping in the US sparked public health concerns.
Critics have long held that the flavoured products, which include sweet fruit tastes, are appealing to children.
It is a major blow for tobacco companies, which have hoped to refocus their businesses away from traditional cigarettes, at least in Europe and North America.
Imperial said it is launching a cost savings programme to mitigate the impact of falling demand, which will bring a £40 million hit to adjusted operating profit.
The flavour ban has also forced it to write down the value of its stock by £45 million, in line with previous forecasts.
“We believe that NGP provides consumers with potentially less harmful alternatives to combustible tobacco and offers a significant growth opportunity over the medium term to complement our Tobacco business. We support regulation that enforces higher product and marketing standards,” Imperial said in a statement.
The tobacco business performed well in the first three months of the year, and the business in in talks to sell its premium cigar business.