Debt Policy at UST
Debt Policy at UST
Attributes and Risks of UST
UST is the market leader in the moist tobacco segment. In a struggling tobacco industry, UST has shown consistent growth over the past few decades. Despite the decrease in demand for smoked (cigarette) tobacco, there is a growing demand for UST’s products. The perception that smokeless tobacco is healthier than smoked tobacco has helped the company to build a strong customer base. Therefore, despite some legislative setbacks, the company is growing strongly. The company has registered consistent revenues, superior brand name, strong asset base, and geographical diversification (within the US). Despite these favorable attributes, some risks have recently led analysts to doubt the future reliability of UST.
The tobacco industry has been subject to a very hostile legislative environment. Although UST has faced relatively lesser legislative actions, the restrictions on advertising and the possibility of future legislative actions cast a doubt over the persistent in results that have been historically associated with UST. The company is also poorly diversified as it derives most of its revenues and profits from a single product – moist tobacco. The other products offered by the company – cigars and wine – have not demonstrated attractive results. Recently, the company has also faced stiff competition for smaller firms within the industry. Although UST commands a significant portion of the moist tobacco segment, its market position faces a serious challenge from the small players, who are trying to capture shares by cutting their prices. Despite these concerns, UST remains a very attractive firm with excellent operating ratios and growing revenues. Overall, the operating risk of the company remains quite low. From a bondholder’s perspective, the risks associated with UST might not be significant. UST has minimal debt on its balance sheet, and has significant profits and cash flows to meet its debt obligations. It comes
Attributes and Risks of UST
UST is the market leader in the moist tobacco segment. In a struggling tobacco industry, UST has shown consistent growth over the past few decades. Despite the decrease in demand for smoked (cigarette) tobacco, there is a growing demand for UST’s products. The perception that smokeless tobacco is healthier than smoked tobacco has helped the company to build a strong customer base. Therefore, despite some legislative setbacks, the company is growing strongly. The company has registered consistent revenues, superior brand name, strong asset base, and geographical diversification (within the US). Despite these favorable attributes, some risks have recently led analysts to doubt the future reliability of UST.
The tobacco industry has been subject to a very hostile legislative environment. Although UST has faced relatively lesser legislative actions, the restrictions on advertising and the possibility of future legislative actions cast a doubt over the persistent in results that have been historically associated with UST. The company is also poorly diversified as it derives most of its revenues and profits from a single product – moist tobacco. The other products offered by the company – cigars and wine – have not demonstrated attractive results. Recently, the company has also faced stiff competition for smaller firms within the industry. Although UST commands a significant portion of the moist tobacco segment, its market position faces a serious challenge from the small players, who are trying to capture shares by cutting their prices. Despite these concerns, UST remains a very attractive firm with excellent operating ratios and growing revenues. Overall, the operating risk of the company remains quite low. From a bondholder’s perspective, the risks associated with UST might not be significant. UST has minimal debt on its balance sheet, and has significant profits and cash flows to meet its debt obligations. It comes