Imperial Tobacco has warned that the growing black market cigarette trade in Europe will dent its profits, despite witnessing a modest rise in tobacco sales in the first quarter of its financial year.

The gloomy forecast was made in the company’s interim management statement, in which the firm predicted that its first half operating profits would be lower than the same period last year due to rising illicit trade and increased investment.

Market trends had worsened in the EU with the legal cigarette market down 7%. “Given our on-going investment and the European market pressures we expect first half adjusted operating profit to be down year on year,” the statement said.

The firm revealed that worldwide sales in the first quarter of the financial year were up 2%. International brands Davidoff, Gauloises, West and JPS performed well with sales up by 12%, and a 10% rise in volumes. Its premium cigar division also experienced strong growth due to the success of the Montecristo mini-cigars, which launched last year, and grew volumes by 3%.

However, chief executive Alison Cooper cautioned that the growth in key markets in Africa and the Middle East and Asia-Pacific was being offset by the “current adverse market dynamics in Europe, with increasing levels of illicit trade.”

She said: “This reinforces the importance of our two focus areas for 2013: further investing behind our key total tobacco assets and geographies; and accelerating our cost optimisation programme, providing funds for investment and mitigation for the full year given the current European environment.”

The firm also announced that long serving CFO Bob Dyrbus will retire once a successor has been found.