BAT nella recente disamina di Fitch...
Fitch Affirms British American Tobacco at 'BBB+'; Outlook Stable
18 May 2009 9:23 AM (EDT)
Fitch Ratings-London-18 May 2009: Fitch Ratings has today affirmed British American Tobacco plc's (BAT) Long-term Issuer Default rating (IDR) and senior unsecured rating at 'BBB+', respectively, and its Short-term IDR at 'F2'. The Outlook on BAT is Stable. The senior unsecured ratings of debt issued by BAT's subsidiaries - B.A.T. International Finance plc, B.A.T. Capital Corp., British American Tobacco Holdings Netherlands and B.A.T. Finance B.V. - are also affirmed at 'BBB+'/ 'F2'.
The ratings continue to reflect BAT's strong position as the joint leader with Philip Morris International (PMI, A+/Negative) in the stable international tobacco industry, supported by its diverse portfolio of brands. The ratings also factor in the company's strong cash flow-generating ability, and geographical diversification, with more than 50% of profits accounted by high-growth emerging markets.
The group's substantial free cash flow (FCF) generation (FY08: GBP755m excluding working capital movements) is expected, at worst, to remain stable in FY09 and FY10 despite the more challenging economic environment. While the company has benefitted from the trading up of consumers in emerging markets to more expensive brands, these trends are now expected to moderate due to pressure on disposable income and the likelihood of excise tax increases for tobacco.
Nevertheless, Fitch notes that the still low price of cigarettes relative to other consumer goods in emerging markets should help underpin some migration of demand towards premium products despite the difficult environment.
Fitch also notes that BAT would benefit from an ongoing supply chain rationalisation and a programme to reduce overheads and indirect costs that is targeted to yield GBP800m cumulative benefits between FY08 and FY12.
Benefits of GBP245m from these programmes were already achieved in FY08, following a total GBP1bn delivered in the previous five-year programme. Such cost savings would also compensate any adverse pressure on net revenue growth.
The ratings also continue to acknowledge the hostile environment for tobacco consumption, which has also resulted in litigation against tobacco companies.
The increasing regulation affecting tobacco products and their consumption includes the gradual extension, as a result of the Framework Convention for Tobacco Control sponsored by the World Health Organisation, of smoking and advertising restrictions to the historically less regulated emerging markets of eastern Europe, Asia and Latin America.
Fitch notes that litigation risk has been gradually reducing, particularly in the more litigious US. BAT is exposed to the US tobacco market through its 42%-owned associate Reynolds American Inc (RAI, 'BBB-'/Stable) which provides it with a fairly regular and predictable stream of dividends thanks to its 75% dividend pay-out policy.
These are received by BAT on a quarterly basis and are added by Fitch to operating EBITDAR due to their recurring and predictable nature. BAT's gross debt peaked at GBP12bn in FY08 as a result of acquisition activity, share repurchases and generous dividend payments (65% of profits) as well as an adverse currency movement in FY08.
For FY09, Fitch expects BAT's lease- and pension-adjusted net debt/ dividend-adjusted operating EBITDARP to reduce to approximately 2.0x (FY08: 2.5x). Fitch expects this reduction to be supported by management's decision to allocate cash flow to debt pay-down and suspend share repurchases for at least FY09, as well as favourable movements of exchange rates.