Imperial Tobacco Group is to restructure its manufacturing operations in Lahr, Germany, as a result of the European Court of Justice ruling on the taxation of singles products.

Following the ruling by the European Court of Justice on 10 November 2005, the German ministry of finance announced that singles products will continue to be taxed as fine cut tobacco until 31 March 2006. Singles produced after this date will be taxed as cigarettes and will therefore no longer represent an attractive value offering to consumers.
As a result, Imperial Tobacco Group will cease production of singles after 31 March 2006. This will result in the loss of around 155 of the 283 jobs at its other tobacco products factory in Lahr, although there will be some redeployment opportunities.
The remaining employees will continue to manufacture eco cigarillos, which the group believes will appeal to singles consumers. However, consumer migration is very uncertain and the group will therefore need to maintain flexibility within its manufacturing operations in Lahr, to ensure that its cost base remains efficient as it continues to carefully monitor market developments.
Employees, the works council and trade unions were informed of the decision today and the consultation process with the relevant bodies is now underway. The restructuring is expected to generate annual cost savings of around £ 4 million from the 2006-07 financial year. It is anticipated that there will be a restructuring charge of around £ 18 million in the current financial year, of which £ 8 million will be non-cash items. (ci)