...Divergent Credit Profiles: Credit profiles have worsened across the European tobacco sector over the past two years and Fitch Ratings expects further deterioration in 2015, before a recovery in 2016. This is illustrated by the revision in Outlook to Negative for British American Tobacco plc (BAT) in June 2015 and Philip Morris International, Inc. (PMI) in July 2015, respectively. The Outlook for Imperial Tobacco Group PLC (Imperial) remained Negative in May 2015. In contrast, US based, Altria Group Inc.'s (BBB+) Outlook is Stable. European Financial Profiles Weaker: The financial profiles of European tobacco companies have deteriorated due to a number of reasons including M&A activity, FX headwinds (both translational and transactional), and profit and profit margin compression on the back of still generous shareholder distributions. As a result, most credit metrics and/or cash-flow generation profiles are now increasingly not compatible with their respective ratings. Rare M&A Activity:...
