British American Tobacco (BAT) posted a profit of ZWL$73.7m in the six months ended June 30 from a loss of ZWL$18.8m in the same period last year attributed to an uptick in revenue on price increases despite a drop in volumes.
The performance by BAT comes at a time a number of companies’ operations have been affected by measures to stem the spread of the Covid-19 pandemic.
It also comes at a time of the weakening of the local currency against major currencies thereby eating into the disposable income.
This has seen inflation rising to 737% by the end of June 2020 when compared to 175.6% in June 2019.
BAT chairman Lovemore Manatsa said inflation contributed to increased operating costs for the company on a historical cost basis.
“Net profit attributable to shareholders for the period under review was ZW$73.7m compared to a net loss of ZW$18.8m in the same period in prior year, representing a 492% increase,” Manatsa said in a statement accompanying the financial results for the period.
Revenue was up 20% to ZWL$410.5m from ZW$341.6m, when compared to same period in 2019 driven by price increases taken during the period as well as revenue generated from the export of cutrag.
These two factors resulted in a gross profit increase of ZW$49.6m (22%) compared to the same period in 2019, Manatsa said.
Selling and marketing costs decreased were down 1% compared to same period in prior year, driven by route to market initiatives aimed at managing the company’s costs.
BAT back in the black, posts ZWL$73.7m profit Administrative expenses were 35% lower than the same period last year at ZW$17m driven by the business’s ongoing cost saving initiatives.
Other losses increased by ZW$116.4m (397%) due to foreign exchange losses on liabilities driven by the devaluation in the Zimbabwe dollar against major trading currencies.
Operating profit was higher by ZW$90.6m (498%) versus the same period in prior year.
The company’s earnings per share increased to ZW$3.58 from (ZW$0.91) generated in the same period in 2019.
Cash generated from operations was a negative ZW$13.1m as a result of a significant increase in trade and other receivables due to prepayments to purchase leaf and an increased debtors’ book as a result of price increases taken during the period.
The board waived the interim dividend for the period ended June 30 2020 to allow reinvestment into the operations of the company.
The Premium Brand, Dunhill, returned to the market as the company was now able to import the brand and consequently it recorded a significant increase of 184% versus the same period in prior year.
In the Aspirational Premium segment, Newbury volumes declined by 10% whilst the Value for Money segment, (Madison and Everest) and Low Value for Money brand (Ascot), recorded a 1% increase and 40% decrease respectively.
These movements were driven by shrinking consumer disposable incomes due to the challenging economic environment and the Covid-19 pandemic’s impact on sales.