IMPERIAL Tobacco, Europe's second-biggest tobacco company, reported the first drop in earnings since it listed on the stock market 17 years ago because of worsening conditions in Europe.
Adjusted operating profit fell 6.5pc to £1.43bn in the six months ended March 31, Bristol-based Imperial said. That compares with the £1.4bn average estimate from analysts.
Per-share earnings growth for the year is expected at the lower end of the company's model of 4pc to 8pc.
Business conditions were "difficult" in the European Union, particularly in Spain, France and Germany, where economic pressures are "more pronounced", it said.
Chief executive Alison Cooper pledged that the company will "strengthen delivery in the second half and into 2014".
Europe's economic slump has also dented volumes at larger competitors British American Tobacco and Philip Morris International.
Imperial is facing a threat to its business from the prospect of a plain-packaging requirement in the UK – which could be announced on May, according to a report in 'The Guardian' – where it's the leader with about 45pc of the market.
Imperial plans to cut costs to make savings of about £300m a year by September 2018, including £30m in the second half of this year.