Zimbabwe: BAT Volumes to Drop

Cigarette manufacturer, British American Tobacco (BAT), projects a bleak second quarter as volumes are expected to decline due to the effects of the Covid-19 pandemic.

Business operations have been negatively affected by the pandemic that resulted in reduced production as companies implemented lockdowns and social distancing initiatives to reduce the spread of the virus.

Corporate earnings being released show the effects of the pandemic are already biting while others will have a clearer reflection on the impact of the pandemic during the second quarter of the year.

For BAT, the group expects a dip in volumes during the second quarter.

"The economic environment is expected to remain challenging and the impact of Covid-19 will be evident in the second quarter," said company Secretary Pauline Kadembo in a trading update for the first quarter.

"The business expects a drop in volumes in the second quarter due to trading for a few days in April 2020 and reduced operations in May 2020. The tobacco selling season has opened and we will continue to monitor the price movements and how these will impact our business."

But for the first quarter, the company recorded a 10 percent increase in volumes, compared to the same period last year.

BAT attributed the growth to various efficiencies from the new trade marketing tools that are being used by the company.

Turnover, jumped 703 percent on a historical cost basis, compared to the same quarter in the prior year on the back of price increases, which were taken to manage the inflationary pressures faced by the company.

The company also commenced cut rag exports in March 2020 to assist in foreign currency generation.

During the period under review, the operating environment remained challenging with limited foreign currency, waning consumer spending due to inflationary pressures. Annual rate of inflation in March was at 676 percent.

This was also in addition to the widening gap between the interbank rates and the parallel market rates.

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