BAT sales down 17pc

Oliver Kazunga Acting Business Editor
BRITISH American Tobacco (BAT) Zimbabwe has recorded a 17 percent decrease in sales volume from the previous year due to constrained demand wrought by liquidity challenges, said the chairman Kennedy Mandevhani, in a financial statement, ending December 31, 2013.
He said the economy performed below expectations throughout 2013.
“Despite limited growth being achieved in the agricultural and mining sectors, demand was constrained by domestic liquidity challenges and restricted availability of external credit lines.

“Industry cigarette volumes have reduced as a result of the slowdown in Gross Domestic Product (GDP) growth and the ongoing general affordability and liquidity challenges that the Zimbabwean consumer faces.

“BAT Zimbabwe continues to lead the cigarette industry despite cigarette sales volumes declining by a very significant 17 percent from the previous year,” he said.

He said the decrease in sales volumes was experienced across all their local brands.
“Our global drive demand, Dunhill, grew by 48 percent compared to last year albeit off a small but growing consumer base.”
Total revenues were $44.6 million, reflecting a 14 percent reduction when compared with the previous year.

This was mainly due to the discontinuation of cut rag exports in July 2013 to allow management to focus the business on building the manufactured cigarette portfolio.

Gross profit increased by $0.2 million to $30.1 million in the year, driven by strong management focus on cost reductions.
An independent research has shown that the BAT market share was at above 75 percent despite the volume challenges the firm experienced.

“On a non-adjusted basis, operating profit reduced to $9.8 million primarily as a result of an International Financial Reporting Standards 2 (IFRS) share-based payment expense of 410.9 million. The expense represents the total value of shares and dividends awarded to employees by our Employee Share Ownership Trust (ESOT) as part of the company’s compliance with Indigenisation and Economic Empowerment legislation,” said Mandevhani.

He said the impact of this expense was offset partly by other income of $4.2 million largely due to the non-recurring write back of payables to a related party for services that had been accumulated during the country’s hyperinflation period.

Following the deduction of finance cost and income tax, there was a profit attributable to shareholders for the period of $3.8 million, a reduction of 69 percent compared with 2012.

Moreso, after the discontinuation of cut rag exports to Mozambique, cash flows benefited from a reduction in inventories of tobacco leaf of $3.6 million.

Cash outflows associated with the ESOT will continue this year and 2015 as the awards settled with employees based on available funding.
On the outlook, Mandevhani said, trading conditions have remained challenging going into 2014 as the country continues to strive for economic growth and stability.

“We are confident that our strategies remain appropriate, that our brand portfolio is consumer relevant and that the excellent quality of our people and processes will deliver the sustainable competitive advantage required for future success and benefit of shareholders,” he said.