The cigarette and tobacco industry is emerging as one of the very few winners from the economic havoc wreaked by the spread of the Covid-19 virus.
Two of the world’s big four tobacco groups — Imperial Brands and British American Tobacco (Bat) — saw their shares surge on the back of them agreeing substantial new credit lines and saying they have taken no material hit from the coronavirus storm.
Imperial — the owner of Drum, Rizla, Gauloises, and Blu vapes — saw its shares jump by as much as 11% after securing €3.5bn in new lending.
Rival Bat — the maker of Lucky Strike, Camel, and Dunhill cigarettes — is raising €2.2bn in debt for general working capital and early debt repayments. Its shares rose by nearly 3%.
“When other industries are struggling during the Covid-19 pandemic, Imperial has seen little impact thanks to the unfaltering demand for its product. The possibility of supply chain disruption still exists, but Imperial is stockpiling key product lines as a precaution,” said Hargreaves Lansdown equity analyst Sophie Lund-Yates.
“We understand tobacco shares aren’t for everyone, and global tobacco volumes have been falling for decades. But smokers’ willingness to pay ever higher prices mean tobacco giants have managed to protect their margins and grow dividends even as the smoking population dwindles,” she said.
Elsewhere, Volkswagen is also seeing a silver lining, with it expecting its vehicle sales in China — the world’s largest car market — to have quadrupled last month and saying that it is “cautiously optimistic” that the worst effects of the crisis, in China, will be over in “two-to-three months”.
“There are more and more signs that business is recovering. By the middle of the year, we could be back to last year’s planning. Hope is returning on the Chinese market,” VW’s boss in China Stephan Woellenstein said.
Turbulence still reigns in the airline sector, however. IAG-owned British Airways has temporarily suspended all of its flights from London’s Gatwick Airport, the second busiest airport in the UK, due to the virus. BA warned, this month, that is was in a battle for its survival.
Davy has forecast that around half of Europe’s 120 airlines might not survive the economic impact of the virus.
However, troubled carrier Norwegian Air could end up getting around €256m from Norway’s government credit guarantee for airlines, which has been approved by the EU.
The world’s largest advertising firm WPP has scrapped its dividend, share buyback programme and 2020 guidance due to the market uncertainty. The company is also slashing all operating costs.
Cruise line giant Carnival is looking to raise $6bn through bond offerings in the US and the eurozone and via a share placing.