Moody's Predicts Stable Tobacco Industry Rating

Source from:  Associated Press 03/06/2009

Moody's Investors Service said Tuesday that the U.S. tobacco industry's credit outlook remains stable, arguing that sales pressure resulting from the economic downturn and a tax hike is likely to be manageable. "Tobacco products remain widely consumed, relatively low-priced and addictive," says Moody's (nyse: MCO - news - people ) Senior Credit Officer Janice Hofferber. "Although volumes may continue to decline at elevated rates in the near term, we expect companies to offset the majority of volume declines with retail-price increases." On April 1, the per-pack federal excise tax on cigarettes will rise to $1 from 39 cents. While revenue growth will be difficult to achieve over the next year, Moody's said profitability and cash flow should remain relatively strong. "Most of the ratings in the sector - which are investment grade - are likely to remain stable in 2009," Hofferber said. Enditem