Imperial Brands saw its share price drop by over 5% in early trading after publishing what AJ Bell described as a "cautious outlook" in its latest trading update.

The tobacco and new generation products (NGP) firm stated that it expects to report "robust" tobacco pricing, as well as NGP innovation, which will drive low-single-digit percent growth in net revenue in the first half.

Furthermore, Imperial is anticipating its operating profit to be slightly higher year-on-year, with growth accelerating in H2 in line with previous guidance. Year-on-year, this figure is set to increase by between 3% and 5%.

It is also on track to deliver high-single-digit earnings per share growth, with at least £2.2bn in free cash flow for the full year.

However, Imperial has stated that the conflict in the Middle East has resulted in a "more uncertain" geopolitical and macro environment.

It stated that whilst there has been no material business impact to date, the potential future impact during the second half of the year remains uncertain.

The update comes as the firm reported a "good start" to its 2030, with strong momentum behind its execution and its transformation towards becoming a more "consumer-centric, data led, agile and efficient challenger".

Head of markets at AJ Bell, Dan Coatsworth, stated: "Tobacco and vaping can be addictive, which means investors expect steady demand for manufacturers of these products during both good and bad economic conditions. While consumers might feel the pinch during harder times, they might consider tobacco and vaping as essential items, or at least priorities over other items. In theory, that makes the tobacco and vaping sector defensive, but it’s not guaranteed to always work that way.

"Imperial Brands’ shares fell on a more cautious outlook where it flagged uncertainties around the Middle East conflict. The spike in energy prices threatens to drive up the cost of living and potentially make borrowing more expensive if interest rates go up. That’s problematic as it could make consumers think hard about where they spend money, even on addictive products like tobacco and vaping. Some people might have no choice but to make cutbacks, even on things they cherish day to day."

Imperial will announce its interim results for the six months to 31 March on 12 May.

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