SOURCE: Altadis

February 22, 2007 02:34 ET

ALTADIS : ALTADIS 2006 RESULTS: HIGHLIGHTS

PARIS -- (MARKET WIRE) -- February 22, 2007 --

- Overall performance did not lag far from that of the year 2005 for sales and Ebitda; Ebitda at EUR 1,148 million despite heavy impact of taxes on the cigarette business in Spain

- A very good performance in cigars, Moroccan cigarette operations and tobacco logistics in Italy and accelerated reactivity in cost cutting programs partly offset the negative impact of Spain situation

- The Board will propose to the next AGM the payment in 2007 of a dividend of EUR 1.1 per share, a 10 per cent increase on the dividend of EUR 1 per share paid in 2006

Financials: key indicators at par

- Economic sales at EUR 3,970 million (EUR 4,112 million in 2005).

o Cigarettes: sales dropped to EUR 1,693 million, down by EUR 286 million, mainly due to the impact of increased excise taxes in Spain.

o Cigars: sales were up EUR 3 million, reaching EUR 888 million, thanks to continued strong performance in US operations and Havana cigar sales

o Logistics: sales were up EUR 44 million, reaching EUR 1,191, thanks to tobacco logistics in Italy and Morocco and the whole non tobacco logistics business.

o Other operations, mainly Travel Retail Business, contributed EUR 210 million, reflecting the consolidation of Aldeasa.

- Group Ebitda at EUR 1,148 million (EUR 1,232 in 2005)

o Restructuring generated EUR 54 million while the cost saving plan launched in 2006, generated EUR 91 million.

o Cigarettes: Ebitda was EUR 524 million, down by EUR 144 million, reflecting the squeeze of the margin in Spain since the beginning of 2006 and at the same time the drop in sales and cost cutting benefits.

o Cigars: Ebitda continued its exceptional growth (+EUR 27 million, +10.8%) at EUR 281 million.

o Logistics: Ebitda was stable at EUR 310 million.

- Net income stood at EUR 453 million (EUR 577 in 2005), with a high impact of one-off items

Restructuring and cost saving programs in fast progress

- Altadis considerably amplified its restructuring and savings programs in order to address heavy changes in operations and in the tobacco business environment.

- The current restructuring program (launched prior to 2006) is implemented as per schedule; it will come to an end with the closure of Sevilla and Tarragona plants, together with some more departures, in 2007. This plan providing EUR 64 million savings.

- The cost cutting program launched on February 1st, 2006, providing EUR 91 million savings.

- The implementation of the latest restructuring program launched on February 14th, 2006, leading to a rationalisation of corporate functions and business units with single locations for each of them.. Recurrent savings will reach EUR 60 million, the bulk of which will be captured in 2007 and associated costs amounted to EUR 86 million.

- The total savings would be reaching EUR 215 million over three years: EUR 145 million savings have been achieved in 2006 and EUR 46 million and EUR 24 million are expected to be captured in 2007 and 2008, respectively.

- Reestructuring was also implemented in Morocco, where we have just closed the factory in Kenitra, and in Russia with a total headcount reduction of 272 people jointly.

Cigarettes: increased excise taxes changes in Spain make 2006 a difficult year

- The group sold 119 billion cigarettes in 2006 (135 billion in 2005), amounting to EUR 1,693 million (EUR 1,979 million in 2005).

- The decrease of volumes reflects the very low merchandising activity in Russia in the first half and the secular decline of dark cigarettes. The decrease of sales in value is due to the higher excise tax in Spain on top of the lower volumes.

- Blond cigarettes (75% of total sales) stood at EUR 1,264 million (EUR 1,427 million in 2005).They grew strongly in Benelux, Finland, Central Europe by 10.6%, and by 18.4% in Morocco. The volume decline in the Middle East for practical reasons and by the events in the region and to the reorganisation of logistic flows. In Russia, Q4 was also impacted negatively by the higher than average comparison base existing in 2005. In Spain, sales were very important negative impact by the rapid changes in taxes and prices early in the year. They consequently dropped from EUR 410 million to EUR 265 million. In France, sales remained stable at EUR 215million.

- Gauloises Blondes benefited from a satisfactory market evolution in France, but also confronted the decline of total market volumes in most other markets and volatility of sales in some Middle Eastern countries. The brand's #3 ranking in Germany and Austria remains firmly established. Fortuna continues to progress in France and Morocco while its sales in Spain reflected the change of the market.

Cigars: increased strongly is profitability

- The EUR 888 million sales broke down between US (55%), Europe (17%) and Havana cigars (15%) The performance pattern remained at a very high level with the US market and the Havana brands as main drivers.

- Sales of Altadis USA increased by 4.1% in dollars and 3.4 in euros to EUR 487 million.

- Sales of Havana grew by 12.1% in euros to EUR 135 million; they performed very well in mature markets with encouraging performance in many emerging markets;

- In Europe, sales decreased slightly in France and were impacted in Spain by the new regulations restricting to the on-trade retail distribution.

Logistics: good tobacco logistic performance in Italy and Morocco

- Tobacco logistics sales (47% of total sales) stood at EUR 570 million (EUR 562 million in 2005). They reflected the trends of cigarette markets in volume, Spain (-1.9%), France (+1.8%), Italy (+1.1%) and Morocco (+3.7%), and indirectly the changes in taxes and retail prices.

- General logistic activities posted an increase of 6.3%. Growth was achieved among others in transport services in Spain and Portugal and in pharmaceutical logistics. In Morocco, general logistics is developing at a good pace.

Outlook

2006 was an unprecedented challenging year when the Company created a solid business platform to resume, as soon as in 2007, the organic growth trend in each of its three Divisions. Focus will be placed on developing the business by supporting the equity of its brands. The restructuring programs currently in course will be fully implemented and will improve the performance. The continuing with the disposal of non core assets (more than EUR 200 million are targeted in the coming two years) and the corporate reorganisation plan announced yesterday will provide a stronger base for the Group's policy of returns to shareholders for coming years: double digit growth of the dividend and, in the absence of major investment opportunities, share buy backs, a minimum of 3 per cent within June 2007 and coming back to 5 per cent within June 2008.

Full year 2006

+-------------------------+----------+----------+------------------+
|(Euro million)           |  FY 2005 |  FY 2006 |  2005-2006 Change|
+-------------------------+----------+----------+------------------+
|Revenues                 |  12,798.2|  12,495.8|             -1.7%|
+-------------------------+----------+----------+------------------+
|Economic sales           |   4,111.9|   3,970.1|             -3.4%|
+-------------------------+----------+----------+------------------+
|EBITDA                   |   1,231.9|   1,147.8|             -6.8%|
+-------------------------+----------+----------+------------------+
|Net income group share   |     576.6|     452.7|            -21.5%|
+-------------------------+----------+----------+------------------+
|Earnings per share       |       212|       175|            -17.5%|
|(Eurocent)               |          |          |                  |
+-------------------------+----------+----------+------------------+
|Cash earnings per Share  |       267|       243|             -9.3%|
|(Eurocent)               |          |          |                  |
+-------------------------+----------+----------+------------------+
|Average number of shares |     272.3|     259.2|   4.8% reduction |
|(mn) (1)                 |          |          |                  |
+-------------------------+----------+----------+------------------+
(1) Average number of shares < > = average of (total number of shares - treasury stock).

The number of shares outstanding as of December 31th, 2006 was 256.1 million, of which 2.7 million were held by the Group as treasury stock.

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