The Islamic State's advances in Iraq have hit Imperial Tobacco's half-year results.
The U.K. tobacco giant 's underlying net revenue took a 3 percent hit in its growth markets due to instability in Iraq in the 6 months to March, where security forces and US allies continue to battle ISIS militants.
"Trading reduced significantly against a backdrop of a worsening political and security situation in territories where we have a high presence," Imperial Tobacco's earnings report read.
"The deteriorating political and security situation has significantly impacted industry volumes."
Iraq accounted for a near 2 percent fall in volumes. Underlying tobacco volumes were down 5 percent, but excluding Iraq were only down 3 percent. Growth brand volumes also took a 7 percent hit in the last half year, 6 percent of which was due to poor performance in the Middle Eastern state.
The maker of Davidoff and Gauloises cigarettes on Wednesday said revenue fell 4 percent to 12.1 billion pounds in the six months ended March 31.
Like all tobacco companies, Imperial faces falling sales in a number of markets as people cut back on smoking due to tighter budgets, tax increases and growing health consciousness.
The company said it expects to close its $7.1 billion acquisition of certain U.S. brands in the second half of this year, pending U.S. antitrust approval of a related deal between Reynolds American and Lorillard. It added that it was still on track to meet its goals this year, which include increasing its dividend by at least 10 percent.
—Reuters contributed to the reporting of this story