The ratings on U.K.-based international tobacco company British American Tobacco PLC (BAT) are based on the group's strong position as the world's second-largest international tobacco company, high and mostly predictable level of cash flows, and unrivalled geographical diversification. These factors are offset, however, by BAT's moderate financial profile (on a fully pension-adjusted basis) and ongoing litigation risk, especially in the U.S. Although BAT's turnover decreased by 7% in 2002 (on a 4% volume drop) to £10.6 billion ($17.5 billion), partly due to weaker duty-free sales and currency evolution, the group still commands a stable 15% share of the global cigarette market, through a diverse portfolio of brands. BAT continued to improve its operating margin in 2002--to 29% of sales from
