SOURCE: Altadis

August 30, 2007 10:24 ET

Altadis : Altadis First Half 2007 Results Highlights

MADRID, SPAIN--(Marketwire - August 30, 2007) -


- Overall performance of the Group during the semester for key profitability indicators was in line with management's expectations: Group Ebitda increased at EUR 590 million, +7.2%; net income stood at EUR 247 million, +27.2%, (EUR 194 million in 2006); and earnings per share were EUR 97.7cent, an outstanding increased of 32.4%.

- Good results driven by the strong performance of the Spanish, Moroccan and Middle Eastern cigarette operations, Cuban cigars business and tobacco logistics in Spain.

- The Group completed the spin-off of the French logistic activity from Seita's tobacco operations and transformed it into a legal entity, Altadis Distribution France (ADF), which now fully exists. Taking into account the offer presented by Imperial Tobacco for the acquisition of Altadis, and its expected timing, Altadis has decided to delay the next step of the corporate reorganisation.

Financials: key indicators

- Economic sales at EUR 1,938 million (EUR 1,934 million in 2006).

o Cigarettes: sales were up EUR 62 million, +7.7%, reaching EUR 881 million. Spain, Morocco and the Middle East provided substantial growth to the sales of the Division

o Cigars: sales reached EUR 413 million (down EUR 37 million, - 8.2%). The unfavourable exchange rate variation, the challenging market trends in the US and the very strong comparison base of 2006, explain the performance.

o Logistics: sales were up EUR 51 million, +8.8%, reaching EUR 632 million. Spanish market, in both tobacco and general logistics, has been the major driver of this very good performance.

o Other operations, Aldeasa and corporate overheads, reached EUR 103 million (100 million in 2006).

- Group Ebitda at EUR 590 million (EUR 550 in 2006)

o Restructuring generated EUR 25 million of cost savings.

o Cigarettes: Ebitda was EUR 331 million, an increase of EUR 82 million, +33%, reflecting the improvement of the margin in Spain, in addition to the positive change in the mix of sales and efficiency benefits, as well as a seasonality effect.

o Cigars: Ebitda declined EUR 12 million, (-8.7%), to EUR 130 million (EUR 142 million in 2006), reflecting an unfavourable exchange rate evolution during the period, a higher than average comparison base and also tougher competition and a challenging market trends in the profitable US market.

o Logistics: Ebitda increased by 8.7% to EUR 160 million (up EUR 12 million from EUR 148 million in 2006), driven mainly by the improved Spanish tobacco market

- Net income stood at EUR 247 million, +27.2% (EUR 194 in 2006). Earnings per share were EUR 97.7 cent (EUR 73.8 cent in 2006), an increase of 32.4 per cent

significant restructruing and saving programs as per schedule

- Since early 2006 the Group considerably amplified its restructuring and savings programs in order to address heavy changes in operations and in the tobacco business environment.

- The industrial restructuring (launched prior to 2006), is providing EUR 64 million savings.

- The savings program launched on February 1st, 2006, with EUR 91 million savings.

- The latest restructuring, affecting mainly to both corporate functions and business units management, launched on February 14th, 2006, is generating EUR 60 million savings.

- The total savings are expected to reach EUR 215 million over three years: EUR 145 million savings were achieved in 2006, EUR 46 million are being captured in 2007, as planned, and EUR 24 million are expected to be captured in 2008.

Cigarettes: Spain, Morocco and Middle East markets led to strong growth

- The group sold 58.9 billion cigarettes during the first half of 2007 (54.2 billion in 2006), amounting to sales of EUR 881 million (EUR 819 million in 2006).

- The 8.6 per cent increase of volumes is mainly due to a recovery of sales in certain areas such as Russia and Middle East. The increase of sales is basically due jointly to the volumes, the higher prices in Spain and the good evolution of the Moroccan market.

- Blond cigarettes (75% of total sales) stood at EUR 664 million (EUR 605 million in 2006). Sales grew in Spain, France, Morocco, the Middle East and Russia by respectively 20.8 per cent, 2.3 per cent, 25.6 per cent, 24.1 per cent and 11.4 per cent. In Germany, sales improved in the second quarter and slowed down the decline showed during the first one, but markets trends are still weighing against the segments where Altadis products are stronger.

- Altadis key international blond brands, Gauloises, Fortuna and Gitanes, which jointly accounted for 56 per cent of the blond sales in value (EUR 375 million) and 47 per cent of the blond volumes (20.6 billion units), showed a strong volume increase of 9.4 per cent during the semester, whereas in value terms they were up by 4.3 per cent.

Cigars: second quarter rapid and effective reaction in the US

- The EUR 413 million sales broke down principally between US (55%), Havana cigars (17%) and Europe (15%). The Havana cigars and Spanish market performed strongly, but it was not enough to offset the reduction of the US sales in the frist quarter and the dollar evolution during the semester.

- Sales of Altadis USA decreased by 4.5% in dollars and 11.7% in euros to EUR 226 million.

- Sales of Havana increased by 6.8% in dollars (-1.2 per cent in euros) to EUR 69 million; they performed very well in mature markets (for example in Spain, Germany and Italy) and showed very encouraging performance in emerging markets (Russia, Asia-Pacific, Latin America and Morocco).

- In Europe, the Spanish cigar market notably recovered from the drop happened at the beginning of last year following the entry in force of the new regulations restricting retail distribution (+6.9 per cent at EUR 39 million) and in France sales declined to EUR 24 million (EUR 28 million in 2006)

Logistics: good performance

- Tobacco distribution represented 47% of total logistic activity. Sales stood at EUR 298 million (EUR 278 million in 2006), up by +7.2 per cent. They reflected the trends of tobacco markets in volume, Spain (+0.3%), France (flat), Italy (-1.0%) and Morocco (+2.8%), and indirectly via inventories the changes in retail prices.

- General logistic activities, with sales of EUR 340 million (EUR 311 million in 2006) posted a solid increase of 9.6%. Growth was achieved mainly in transport services in Spain and Portugal (+ 15.2 per cent), in publishing, basically in books (+14.5 per cent), and in pharmaceutical logistics (with sales of EUR 11 million and a +21.6 per cent growth). In Morocco, general logistics is developing fast and in the first half of 2007 accounted for 12 per cent of total logistics economic sales in that country.

Outlook

Results for the first half of 2007 showed renewed and significant growth trends across most business lines, as a result of the multiple initiatives undertaken in 2006 to strengthen the business and reduce costs. Altadis expects organic performance to remain solid during the second part of the year, although it is adjusting its full year expectations to take into account the effect of the persistent weakness of the US dollar.

2007 H1

+-------------------------+---------+---------+------------------+
|(€ million)              |  H1 2006|  H1 2007|  2006-2007 Change|
+-------------------------+---------+---------+------------------+
|Revenues                 |  6,153.7|  6,127.4|             -0.4%|
+-------------------------+---------+---------+------------------+
|Economic sales           |  1,934.4|  1,937.5|             +0.2%|
+-------------------------+---------+---------+------------------+
|EBITDA                   |    550.4|    590.0|             +7.2%|
+-------------------------+---------+---------+------------------+
|Net income group share   |    194.1|    246.9|            +27.2%|
+-------------------------+---------+---------+------------------+
|Earnings per share       |     73.8|     97.7|            +32.4%|
|(Eurocent) (1)           |         |         |                  |
+-------------------------+---------+---------+------------------+
|Average number of shares |    263.1|    252.8|    3.9% reduction|
|(m) (2)                  |         |         |                  |
+-------------------------+---------+---------+------------------+
+-------------------------+---------+---------+------------------+
(1) Basic and diluted Earnings per share were equal.

(2) Average number of shares < > = average of (total number of shares - treasury stock).

The number of shares outstanding as of June 30th, 2007 was 256.1 million, of which 3.7 million were held by the Group as treasury stock.

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