Implied volume contraction for Imperial Tobacco in the company's third quarter was disappointing, Nomura Securities believes, but confirmation of cash conversion targets by the company was a compensating factor.

Nomura said the figures imply volumes dipped by around 5% in the company's third quarter, which was "disappointing for the market given the company had previously indicated that volumes would be stable y-o-y [year-on-year] in 2H10 [second half of 2010]."

"Whilst some negative op [operating] leverage impact may make delivery of (high end) consensus EPS [earningss per share] for FY10 [fiscal 2010] a little less comfortable, we note the vols [volumes] shortfall is largely low priced/low margin. This limits the profit impact at group level and contains our FY EPS revision to less than 1%," advises Nomuraa analyst David Hayes.

The uncertainty on operational consistency will not have been helped by the weakness in volumes and Hayes would not be surprised if this led to some short term share price weakness, though confirmation of cash conversion targets should provide some support.

Nomura's recommendation remains "buy", with the share price around £1 below its 12-month price target of 2000p.

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