Tobacco - tips for growth Health police, regulation, austerity, price wars - it is a wonder that tobacco companies manage to eke out any kind of growth at all. They have to work hard for it though, as Imperial Tobacco and Swedish Match both demonstrated on Tuesday. At Imperial, strong performances in Europe were cancelled out by weakness in America and falling profits in the logistics business. At Swedish Match the reverse was true, with volume growth in US cigars countered by market share losses in Swedish snus because of a price war. The result was uninspiring performances all round - Imperial's full-year operating profit edged up 2 per cent (before a goodwill write-off), while Swedish Match's third-quarter operating profit was up 4 per cent. Some companies are doing more to take the future into their own hands than others. Imperial has been investing in brands such as Davidoff and JPS, increasing advertising spending by a quarter. And, like rivals BAT and Philip Morris, it puts more than 3 per cent of its revenues into capital spending as it develops new products. Swedish Match is splashing out more than it used to - capital spending is expected to rise by a fifth this year as it increases manufacturing capacity for cigars - but even after that its capex to sales ratio is under 2.5 per cent. That has not prevented Swedish Match shares from attracting a premium rating. But a lot of the elements that supported its valuation are starting to weaken. The price war in Swedish snus is a big blow, and hope of an end to the ban on snus elsewhere in the EU is fading. That in turn will dim speculation that the company could become a takeover target. Even after Tuesday's 9 per cent fall, the shares trade at a premium to BAT and Philip Morris, which are on 15 times earnings. Until there is more clarity from Sweden, which accounts for half of revenues, that is undeserved.