Lucia Kassai and Rodrigo Orihuela – Bloomberg, 8/3/2012
Souza Cruz SA (CRUZ3)’s 64 percent surge in the past year has made the Brazilian cigarette maker the global industry’s second-most expensive stock even as it loses market share to illegal sellers.
The local maker of the Lucky Strike and Dunhill brands, based in Rio de Janeiro, has a price-to-estimated earnings ratio of 24.3, second only to India’s ITC Ltd. (ITC) The stock is expected to fall 12 percent, the most of any tobacco producer worldwide, according to median 12-month target-price estimates tracked by Bloomberg.
Souza Cruz is losing sales to black-market cigarette sellers amid lax government control and a growing tax burden. Illegal cigarettes accounted for about 20 percent of Brazilian sales last year, driving down Souza Cruz’s share to 61 percent from 62 percent a year earlier, the company said in a presentation on its website.
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