UPDATE 3-Imperial warns U.S. vaping backlash to hit results

Pushkala Aripaka and Indranil Sarkar

* Imperial expects full-year EPS to be flat

* Company gets 30% of profit from United States

* Company evaluating NGP supply chain as demand hit (Recasts, adds analyst comments, details on Australian business)

Sept 26 (Reuters) - Imperial Brands said the regulatory crackdown on vaping in the United States will hit its full-year profit and revenue, wiping 12% off its shares on Thursday in the latest fallout for tobacco firms from the ongoing U.S. health crisis.

The caution by the British maker of myblu e-cigarettes, Winston and Gauloises cigarettes, comes a day after U.S. tobacco giants Philip Morris and Altria axed their merger talks in the face of the backlash against vaping.

E-cigarette devices, which vaporize liquid containing nicotine, have come under the scrutiny of government bodies worldwide after a spike in teenage use and a string of illnesses and deaths possibly linked to the devices.

The U.S. administration has pulled the plug on flavoured e-cigarettes, removing them from stores, and some countries including India and Brazil have banned them in a crackdown that could reshape the tobacco industry.

Imperial said the U.S. regulatory risk has prompted a marked slowdown in growth of the vapour category in recent weeks, with many wholesalers and retailers not ordering or allowing promotion of the products.

It now sees annual revenue growing around 2% and earnings per share to be flat compared to the previous year at constant currency rates. Its next generation products (NGP) unit focusing on e-cigarettes and vapour-based products is seen growing below expectations.

Imperial, which makes nearly 30% of its operating profit in the United States, had earlier expected revenue to grow at or above the upper end of its forecast range of 1% to 4%, with profit rising between 4% and 8%.

Imperial was one of three FTSE 100 listed stocks to issue a profit warning on Thursday. British Airways owner IAG and education group Pearson also cautioned on profit.

Imperial shares looked on track for their biggest one-day fall ever after Imperial also warned of high competition in Australia for its tobacco business. Rival British American Tobacco's shares tumbled 5%.


Australia was another key driver of the profit warning as Imperial is aggressively pushing for volume share in the region, Liberum analyst Nico Von Stackelberg said. Australia generates about 10% of the company's operating profit.

Imperial's warning sent its shares nearly 22% lower for the year so far, adding to investor woes.

In July, the company said it would drop its 10% dividend growth target from next year to focus on developing its e-cigarette portfolio as traditional smoking wanes.

Imperial also said it could also end some contracts in its NGP supply chain for these newer products as it evaluates the future. The possible contract cuts are not included in its latest outlook, it said.

Stocks such as Imperial have historically been bought by investors for their earnings and dividend payments. However, Russ Mould, investment director at AJ Bell, said the cigarette industry can no longer be seen as a defensive investment because of political and regulatory concerns.

"The risks are increasing on a daily basis and Imperial Brands' troublesome trading update may not be a one-off blip," Mould said.

(Reporting by Pushkala Aripaka, Indranil Sarkar and Siddharth Cavale in Bengaluru; Editing by Emelia Sithole-Matarise and David Evans)