Zimbabwe: BAT Bemoans Worsening Economic Problems As Volumes Decline 18%

16 December 2019

British American Tobacco has recorded an 18 % decline in sales volumes against a backdrop of worsening economic problems, inflation and persistent power outages, the cigarette manufacturer's company secretary Pauline Kadembo has said.

Presenting a trading update for the nine months ending September 30 2019, Kadembo blamed the obtaining economic environment for the firm's poor performance.

"During the period under review, the operating environment remained challenging characterised by shortages of foreign currency, devaluation of the local currency, high inflation and persistent power outages. As a result, the company recorded an 18 % decline in volumes compared to the same period last year," she said.

Kadembo said the cigarette excise regime was changed from a single specific one to a mixed regime system specific rate and ad valorem additionally worsening the problem.

She said the obtaining economic challenges resulted in depressed consumer uptake, prompting the company to implement a pricing strategy aimed at mitigating cost pressures as well as protecting volumes.

"The company's Premium brand, Dunhill, recorded a 92% decline driven by the company's inability to import the brand, given that excise duty is payable in foreign currency. On the other hand, the Aspirational Premium brands, Newbury and Kingsgate, saw a single-digit decline of 3% compared to same period last year," Kadembo said.

According to the trading update, Everest and Madison, declined by 17 % and Low Value for Money brand, Ascot, was 27% down compared to same period last year.

Despite the decline in volume, the Company recorded a growth in revenue and still remains profitable.

In spite of the challenges, the firm has implemented strategies to keep afloat.

BAT's revenues increased by 16 percent during the financial year ending December 31 2018 when compared to the previous financial year.

Gross profit for the previous year increased by US$4.7 million compared to 2017 due to increased efficiencies in the Company's manufacturing activities.

Currently, the firm has remained consistent in terms profit generation as confirmed by Kadembo.

"Despite the decline in volume, the company recorded a growth in revenue and still remains profitable," he said.

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