ALTADIS : Altadis increases 2010 targets

Market Wire, April, 2007

23th April, Madrid

Madrid, Paris, London: Altadis SA ("Altadis"), a leading global tobacco business with a unique portfolio of complementary tobacco assets, today announces an update of its targets to be achieved by 2010. This update follows the strategy presentation in October 2006.

Targets Update

Antonio Vázquez, Chief Executive Officer, said:

"Under the current circumstances it is the duty of the Company to accelerate the identification of any potential further upside that could be captured in the coming years. This will give the market enough visibility to properly assess the real value of the Company"

Whilst undertaking this review, Altadis has identified further key areas of value across each of its key divisions, both at top-line and through improved efficiencies, with new underlying financial targets for the Company by 2010.

In the Cigarettes Division, Altadis is now targeting a sales improvement between 2.5% and 4.5% and an increase of its EBITDA margin to 41% in 2010 compared with its existing guidance of 34.5% by 2009. This new target is consistent with the EBITDA margins of its international peers in Western Europe. The margin increase will be achieved through a combination of operating efficiencies and price increases, especially in Spain where pricing power has now been restored. In addition, longer-term growth opportunities in cigarettes have been identified outside Western Europe, especially in the Middle East.

Altadis' Cigar Division is targeting an increase of its EBITDA margin to 37.5% in 2010 compared with its existing guidance of 34.5% by 2009. This will be achieved by a combination of operating efficiencies and stronger sales growth, above 8% CAGR. There is clear upside potential for Cuban cigars in the US and in high growth markets which the Company is ready to capture. With its strong global leadership position and prestigious brands, Altadis is well positioned to benefit from this dynamic category, and to face both challenging market trends and competition.

In Logistics, the Company believes that value can be extracted from an improved balance-sheet management. It is also targeting an increase of its EBITDA margin to 27% in 2010 compared with its existing guidance of 26% by 2009. This will be achieved by greater operating efficiencies as well as acceleration of specific projects. In addition, Management believes that value can be extracted from bolt-on acquisitions, due to its high efficiency and quality of service.

Altadis is proceeding with spinning the Logistics Division off from Seita's tobacco operations and transforming it into a subsidiary within its own legal structure. This aims at strengthening the logistic businesses and improving the Group's financial structure. The Company is on the way to apply its legal organisation in France, which has already proven effective in Spain and Italy. Once spun off, it is proposed that the new company would become a subsidiary of Logista, thus establishing a leading European logistics company.

Additional upsides have been identified from other efficiencies in particular those related to the disposal of non-core assets with a market value of approximately EUR 650m, and the unlocking of distributable reserves which will allow greater returns in the future.

Imperial Tobacco Proposal

As previously stated, the Board of Directors of Altadis has received, analysed along with its advisors, and rejected, a new approach from Imperial Tobacco Group PLC ("Imperial"), which includes an indicative price of EUR 47 per share with a view to a potential cash tender offer for 100% of the capital stock of Altadis.

Altadis considers the timing of Imperial's approach as opportunistic, since it takes advantage of the 2006 temporarily depressed results, due to the exceptional conditions of the Spanish tax situation, which being now normalised have restored pricing power in this market.

The multiple implied by Imperial's proposal does not reflect:

- the material upsides within the Company

- its fast growth profile

- its high synergy potential, especially in cigarettes

- its diversified and unique businesses

- the strategic value of the company in the tobacco sector

* * *

This target update has been carried out whilst Altadis analyses all possible options, in the best interest of the Company, its shareholders and its employees.

Shareholders presentation

The slide show presentation will be available at Altadis Company web page www.altadis.com

This information is provided by CompanynewsGroup

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