Listed cigarette processor, British American Tobacco Zimbabwe (BAT) swung back into the black, posting a ZWL$61m profit for the 12 months to December 31, 2021 from a loss of ZWL$124m reported in prior comparative period on the back on a rise in revenue despite a dip in sales volumes.
Revenue for the group soared 40% to ZWL$2.1bn from ZWL$1.5bn driven by price increases as well as revenue generated from the export of cut-rag tobacco.
The company also recorded a monetary gain of ZWL$183,140,000 from hyperinflation adjustment from a loss of ZWL$524,199,000 in 2019.
Total sales volumes, however, declined 12% during the reviewed period compared to the prior financial year.
“Reduction in sales volumes was driven by shrinking consumer disposable incomes due to the challenging economic environment and the Covid-19 pandemic’s impact on sales,” BAT chairman, Lovemore Manatsa said in a statement accompanying the company’s financial results published last week.
Total assets stood at ZWL$1.6n during the reviewed period from ZWL$1.1bn reported in the prior period.
Cash utilised from operations was ZWL$30m compared to ZWL$80m in the previous year due to a significant increase in trade and other payables, and inventories on the back of tobacco purchases for the cut-rag tobacco export business.
Selling and marketing costs more than doubled to ZWL$275m during the reviewed period from ZWL$127m on the back of additional marketing investments and strategic initiatives which were implemented by the company so as to respond to, and, to satisfy the consumer preferences.
Administrative expenses increased to ZWL$235m from ZWL$131m, driven by a general increase in costs.
Other losses increased by ZW$106m due to the devaluation of the local currency and foreign exchange losses on foreign creditors.
Manatsa said the economic situation in the country remained challenging in 2020 as the effects of the Covid-19 pandemic coupled with the shortages of foreign currency led to a significant contraction in the key economic sectors of the country.
However, he said the introduction of the foreign exchange auction system by the Reserve Bank of Zimbabwe at the end of June 2020, brought some exchange rate stability for the second half of the year.
High inflation, however, eroded the disposable income of consumers, thereby depressing domestic demand.
The company’s Premium Brand, Dunhill, returned to the market in March 2020 as BAT was now able to import the brand and as a result, it recorded a significant increase in volume growth of 1,481% versus prior year.
However, volumes for the Aspirational Premium segment (Dunhill Kingsgate and Dunhill Newbury), declined by 45%.
The volumes for the Value for Money segment, (Madison and Everest) and Low Value for Money brand (Ascot) also declined by 8% and 47% respectively.
BAT transferred US$15.7m blocked funds to the Reserve Bank of Zimbabwe (RBZ) to facilitate payment to international creditors.
However, the central bank had not paid as agreed.
It is understood that the RBZ was now finalising the appropriate instrument to facilitate settlement of the registered blocked funds.
“As a result of the successful registration of blocked funds, management has continued to account for the outstanding blocked funds at a rate of US$1: ZWL$1,” Manatsa said.
BAT did not declare a dividend to allow for reinvestment into the operations of the company.