Cigarette giant blames ISIS for falling tobacco sales

A UK tobacco firm has blamed the political unrest caused by ISIS In Iraq for blocking the sales of billions of cigarettes.

In its half-year results report posted today, Imperial Tobacco announced that the number of cigarettes sold had been hit by a 5% drop, 2% of which was due to distribution problems in Iraq caused by "the deteriorating political and security situation".

Imperial Tobacco produces a variety of products including Gauloises cigarettes, Drum tobacco and Rizla rolling papers.

The company sold 138.2 billion units in the six months until the end of March this year, compared to 140.1 billion in the same period last year. Half-year revenue also fell by 4% to £12.13 billion (€16.3 billion) and profit slipped 2% to £959 million (€1,289 million).

However, the company also reported a 15% revenue increase in its growth tobacco brands and that it had cut its debt by £7 billion (€9.4 billion).

ISIS has taken over large swathes of Iraq and Syria since declaring a caliphate last year, enforcing a strict version of Sharia law and making trade and distribution of goods across the country extremely difficult.

The Islamist terror group has reportedly banned cigarettes in areas under its control, which include Iraq's second biggest city, Mosul.

UK-based activist group the Syrian Observatory for Human Rights reported in January that a top ISIS official was found beheaded with a cigarette in his mouth and an anti-smoking message written on his body. There have also been reports of the group burning piles of cigarettes, which it declares haram (forbidden) under its strict interpretation of sharia law.

Iraq is identified as a growth market by Imperial. According to the World Health Organisation's Tobacco Atlas, 33.1% of men smoke in Iraq, more than the average in other middle-income countries. However, only 2.9% of Iraqi women smoke.

However, the company previously noted the damaging effects of the country's political instability in their 2014 annual report, where it said that "The worsening political and security situation had a major impact on industry volumes".

"Iraq is a very volatile environment which is going to pose challenges for any fast moving consumer goods company in terms of distribution," says Alex Parsons, Imperial's director of communications.

Parsons acknowledged that ISIS's ban on cigarettes would have had an impact on demand, but said that the fall in volumes was mainly due to distribution problems.

He also declined to specify where the company was active in Iraq and which areas had been particularly affected.

A World Bank working paper released in December estimated that the rise of ISIS had cost $35 billion (€30.84 billion) in lost output to six countries in the greater Levant region - Iraq, Syria, Turkey, Jordan, Lebanon and Egypt.