The new report, entitled "European tobacco: Profits to Remain Robust as Pricing Resilience Offsets Sales Volumes Declines", is now available on www.moodys.com. Moody's subscribers can access this report via the link provided at the end of this press release.

"Continuing solid cash flow generation will offset declining sales volumes in mature markets and mounting regulatory pressures," says Paolo Leschiutta, a Vice President -- Senior Credit Officer in Moody's Corporate Finance Group and author of the report. "As such, we expect operating profit to continue to grow above 6% annually for the next 12-18 months."

In Moody's view, despite pressure on sales volumes tobacco companies may show a degree of improvement in key credit metrics, thanks to increasing profitability. Ongoing improvement in key financial ratios might lead to gradual upward pressure on the ratings.

Moody's notes that a number of issuers, such as Imperial Tobacco Group plc (Baa3 stable) and Swedish Match AB (Baa2 stable), are more exposed to mature markets. However, Imperial's focus on value brands might reduce the impact of sales declines in those markets as more customers are trading down to discount brands in an effort to economise. Philip Morris International Inc. (PMI, A2 stable) and British American Tobacco plc (BAT, Baa1 positive) are likely to benefit from their greater exposure to emerging markets and from their relative progress in developing new formats and innovative products.

Moody's could consider changing its outlook to stable if operating profit appeared likely to grow less than 6% annually. A permanent decline in pricing flexibility or adverse changes in the regulatory environments could also prompt a negative outlook. The main risk to our positive outlook is a further deterioration in European macroeconomic conditions that might lead to an acceleration in down-trading.

Subscribers can access this report via this link: http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_143199NOTE TO JOURNALISTS ONLY: For more information, please call one of our global press information hotlines: London+44-20-7772-5456, New York+1-212-553-0376, Tokyo+813-5408-4110, Hong Kong+852-3758-1350, Sydney+61-2-9270-8141, Mexico City001-888-779-5833, São Paulo 0800-891-2518, or Buenos Aires0800-666-3506. You can also email us at mediarelations@moodys.com or visit our web site at www.moodys.com.

Paolo Leschiutta VP - Senior Credit Officer Corporate Finance Group Moody's Italia S.r.l Corso di Porta Romana 68 Milan 20122 Italy Telephone:+39-02-9148-1100Paloma San Valentin MD - Corporate Finance Corporate Finance Group JOURNALISTS: 44 20 7772 5456 SUBSCRIBERS: 44 20 7772 5454 Releasing Office: Moody's Italia S.r.l Corso di Porta Romana 68 Milan 20122 Italy Telephone:+39-02-9148-1100(C) 2012 Moody's Investors Service, Inc. and/or its licensors and affiliates (collectively, "MOODY'S"). All rights reserved.

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