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S&P raises outlook on Philip Morris International

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S&P raises outlook on Philip Morris International

S&P Global Ratings revised its outlook on Philip Morris International Inc. to stable from negative and affirmed its 'A/A-1' long- and short-term issuer ratings on expectations that the tobacco company will improve debt-to-EBITDA to close to 2.0x over the next 24 months.

"The outlook revision reflects our view that PMI's credit metrics will improve over the next two years, thanks to a significant increase of its EBITDA and a material reduction of gross debt," the rating agency said. "Under our base-case assumptions, we estimate that PMI's leverage will reduce to 2.2x and 2.0x respectively in 2018 and 2019, supported by stronger volumes and sales at its RRP operations, easing of foreign-currency effects on margins, and greater use of cash to reduce debt."

S&P expects the company to achieve adjusted EBITDA of about $13.7 billion in 2018 and $14.8 billion in 2019, supported by market share gains in Asia for its reduced-risk products. It also expects the tobacco producer to increase the volume of its Heat-Not-Burn franchise, particularly its IQOS heated tobacco units, to almost 60 billion units from the current volume of about 36.2 billion units.

The rating agency also said that U.S. tax cuts will help improve Philip Morris' credit profile since they encourage the company to reduce its interest burden.

S&P Global Ratings and S&P Global Market Intelligence are owned by S&P Global Inc.