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Business Reporter
A decline in disposable incomes saw cigarette manufacturer BAT Zimbabwe record a 17 percent decline in sales volumes for the full year to December 2019.
A $116,8 million monetary loss on hyperinflation adjustment as well as a $61,8 million foreign exchange loss resulted in the company making a $27,7 million loss for the period under review.
The company said the outturn was achieved in an environment characterised by local currency devaluation against major currencies which had a negative impact on disposable incomes and product uptake.
“The Value for Money segment, (Madison and Everest) and Low Value for Money brand, Ascot, recorded a 17 percent and 18 percent decline respectively driven by shrinking consumer disposable incomes,” reads a statement accompanying the results.
Dunhill sales declined by 94 percent due to BAT Zimbabwe’s inability to import the product as duties were required to be paid in United States dollars which is not easily accessible on the official market.
In fact, BAT said the official exchange rate had very little significance to the productive sector because of the inaccessibility of foreign currency on the interbank market.
Revenue decreased by $16 million or 5 percent on an inflation adjusted basis when compared to 2018, driven by declining sales offset by numerous price increases.
Gross profit decreased by $16,4 million or 7% percent compared to 2018, driven by an increase in raw material costs and costs associated with the use of generators due to power interruptions during the year in our manufacturing activities.
Selling and marketing costs decreased by $10,5 million (27 percent) compared to 2018 driven by route to market initiatives to manage the Company’s distribution costs.
Administrative expenses were $23,3 million or 44 percent lower than the previous year, driven by the business’s ongoing cost saving initiatives.
Other expenses increased by $62,1 million or 398 percent compared to 2018 due to foreign exchange losses on liabilities driven by the devaluation in the Zimbabwe dollar against the United States dollar.
Due to hyperinflation accounting, there was a $90,8 million or 348 percent increase on net monetary movements mainly driven by the restatement of opening retained earnings.
As a result of the above, operating profit decreased by $162,1 million or 104 percent versus the same period in prior year, to close at a loss of $5,8 million.
Net loss attributable to shareholders for the period under review was $27,7 million compared to a profit of ZW$95,3 million in the previous year, representing a 129 percent decline.
Headline Earnings per share were $4,32 per share compared to $5,89 per share the previous period.
Bongani Ndlovu