WARA rating SITAB SA since October 2016. The second credit rating assigned to SITAB SA was lowered from BBB + to BBB. The prospect goes to negative from stable. Therefore, since December 2017, WARA assigns SITAB SA’s rating BBB / Negative / w-4 on the regional level.
Highlights
SITAB is the historical leader of the tobacco industry in Ivory Coast: the company is a strong market share of 46.9% at end-November 2017;
SITAB invokes manufacture and market the most powerful brand of cigarette Ivory Coast: Fine is the reference brand of Ivorians, and capture alone 45% of the tobacco market in the country in late November 2017, though this market share is declining;
The SITAB financial situation is healthy, though tensions are beginning to emerge due to the incremental erosion of market share: the company is characterized by a still robust profitability (but falling) and a relatively rapid asset turnover, ensuring liquidity still abundant (but under pressure) and a low level of debt;
Operational Support Group is an undeniable advantage, through brand agreements and technical assistance.
Weaknesses
SITAB is a single-product company deploying a strategy of price competition: the operational profile of the company is focused on a single trade, in which the price is a determining variable of competitiveness, itself dependent on an unfavorable tax structure ;
The best attractiveness of Ivorian market stirs lXCHARXappétit import brands: the country is growing and since 2015, imported brands enjoy a tax treatment that is favorable, leading to a rapid compression of the market share SITAB;
In the Ivorian tobacco industry, fiscal volatility is a volatile source of risk: since 2012, excise duties on tobacco are neither stable nor satisfactory for all parties who see distortions can remodel depth this sector;
Like the rest of the world, the Ivory Coast is no exception to the intensification of regulatory and health pressures on the tobacco industry: since the signing of the Framework Convention on Tobacco Control of wHO, the laws applicable in the tobacco industry have tightened considerably, which -Combines to price increases linked to the Taxation- tends to reduce business volumes (Ivorian legal market shrank by 1 1% in 2016 compared to 2015, after a sharp drop of more than 9% in 2015);
Naturally, a market increasingly constrained by regulation and price rise situation attracts more fraudulent imports: in West Africa, smuggled cigarettes account for between 6% and 15% of volumes estimated this represents a shortfall SITAB significant for the industry leader.
A leading monoline
SITAB unique Ivorian cigarette manufacturer, is the domestic industry leader. Majority owned by Imperial Tobacco Group since 2001 and listed on the coast of the Regional Stock Exchange (BRVM) since 1998, SITAB is a historic and major player in the tobacco industry in West Africa.
Leader of tobacco industry in Côte d’Ivoire and Ivorian single cigarette manufacturer, through its subsidiary SITAB Industry SITAB SA benefits both rooting its flagship brand “Fine” and support permanent operational powerful Imperial Tobacco Group.
SITAB is a company “monoline” whose business is the production and marketing of three brands of cigarettes: Fine, Excellence and Davidoff. The firm dominates the domestic tobacco market with a market share of 43% at end 2016, a decrease of 20.7 points compared to the previous year.
As announced last year by Wada, two important constraints on SITAB namely: i) competition of legal import cigarettes continues to increase in the last two years, and ii) an unfavorable tax structure seen positioning medium-end flagship products of the company.
Historical Reminding
Founded in 1956 by four families each controlling its cigarette manufacturing company, under four different brands (Job Nationale, Melia and Bastos), the Manufacture of Tobacco Company of West Africa (MTOA) become SITAB decades later.
Two brands eventually survive initially in Ivory Coast, National Job and while Bastos Melia disappears and continues to exist today, but in other countries. In 1972 MTOA becomes the Ivorian subsidiary of the French tobacco company Seita in this case.
A few years later, the State of Côte d’Ivoire takes 40% of SITAB capital, before selling that stake to Ivorian interests in the 80 In 1986, the majority stake of 60% is sold by Seita and the historical shareholders Bolloré Group, which then increases its stake to 73% in the 90s.
In 2001 Bollore sold its 73% SITAB the British group Imperial Tobacco, while the remaining shares remain listed on the BRVM.
Several conventions bind SITAB SA and its two subsidiaries on the one hand, and the Imperial Tobacco Group on the other. However, within this intra-group network of contracts, the Ivorian subsidiary of Imperial Tobacco Group relies primarily on two key policies:
A convention of brands through this convention as a “license to manufacture and cigarette brand distribution” (signed in 1999 and amended in 2014), SITAB SA and its subsidiaries are licensed to carry the Group’s brands, against a fee of 3% of turnover before tax for the brands offered in the Ivory Coast and the peripheral markets (Niger, Benin, Mali, Togo and Guinea). The charges incurred by SITAB under this agreement totaled 742 million CFA francs for the year ended December 31, 2016 a decrease of 33% compared to the previous year.
A technical assistance agreement: by the agreement signed in 1996 and amended in 2012, the Imperial Tobacco Group, through its branch Imperial Tobacco Limited France, provides its Ivorian subsidiary ongoing technical assistance in the industrial, commercial, administrative, financial, internal audit and risk management. The Group is indeed available to its Ivorian subsidiary of staff employed by the French branch; This provision provides a billing rates based on accomplished tasks, the experience of internal consultants and the time spent by the various stakeholders. In addition to technical assistance, and under a “disbursement agreement,” Imperial Tobacco Limited France may also settle on behalf and at the request of SITAB, expenses related to fees and charges purchases from service providers or various suppliers in return for a commission on purchases made. Investments made under this Convention 2016 totaled 547 million CFA francs. Amortization of the asset under the year amounted to 182 million CFA francs.
There is also an agreement in the context of computer training. This is an agreement with the company ATRS Morocco for training SITAB staff to use various Microsoft programs (Dynamics and SQL), assistance and maintenance in various IT areas (management module , supportXCHARX). The agreement was signed between SA and SITAB ATRS Morocco May 15, 2015. During the 2016 financial year, an annual fee for maintenance of FCFA 70 million was recorded in the books of SITAB. The company recorded an investment of 10 million FCFA from the additional development of ERP Microsoft Dynamics AX. Finally, SITAB has recognized in 2016 a depreciation charge of 2 million relating to the 148 million investments made as part of the implementation of the Microsoft Dynamics AX ERP in 2015.
Avec financialafrik
