S&P affirms Philip Morris Companies Inc ratings
(Press release is provided by Standard & Poor's).
NEW YORK, Feb 26 - Standard & Poor's today has affirmed its single-'A' senior unsecured debt and 'A-1' commercial paper ratings of Philip Morris Companies Inc. (Philip Morris) and Philip Morris Capital Corp., and 'A-1' commercial paper rating of Philip Morris Finance Europe B.V.
The affirmation follows the company's announcement of its plan to buy back $8 billion of stock over the next three years. While this commitment to bolster shareholder value is significant, Standard & Poor's expects funding to come largely from excess cash flow, and believes that management's present financial policies continue to support its ratings.
Philip Morris' corporate credit rating is single-'A'.
Ratings for Philip Morris reflect its exceptional free cash flow (derived from leading domestic and worldwide tobacco market shares) and its position as one of the world's largest food companies and the second-largest U.S. brewer.
Philip Morris had a U.S. tobacco market share of more than 47% for the year ended Dec. 31, 1996 and an estimated 12% share of cigarettes sold outside the U.S. Domestic market share is driven by the company's flagship Marlboro brand, which continued to grow in 1996 to about a 32% domestic share, from 30% at year-end 1995.
Profitability continued to grow in 1996, with operating margins in the 23% area driven by domestic tobacco gains, strong international tobacco profit growth, and divestiture of underperforming or
nonstrategic businesses.
While U.S. tobacco faces significant legal and regulatory challenges, the firm's portfolio of businesses still generates strong earnings and cash flow.
Pretax interest coverage was a strong 10 times (x) in 1996 and is expected to improve over the medium term.
Debt leverage of almost 52% at Dec. 31, 1996, was down slightly from December 1995 levels, despite about $2.8 billion of share repurchases, and is not expected to change materially going forward.
Standard & Poor's expects the $8 billion share repurchase program to be largely financed internall with excess cash flow.
The company has generated over $2 billion of free cash flow per year after capital expenditures and dividends in recent years, and is expected to generate significant free cash flow in future
periods.
More MO Mentum to come!!!! Tar |
