Cigarette manufacturer, BAT Zimbabwe, says shrinking disposable incomes due to increasing inflation and currency devaluation, negatively impacted sales volumes that declined six percent in the half year to June 30, 2022.
In a statement of the financials, chairman of the firm, Lovemore Manatsa, said the half year period was characterised by resurgent inflation driven by instability in exchange rates, which gave rise to price increases.
“Demand was constrained by low disposable incomes, as salaries and wages are being eroded by inflation. Despite these challenges, the company came up with mitigatory measures to ensure consistent product supply at affordable prices,” he said.
BAT Zimbabwe manufactures, distributes and sells tobacco products for local consumption through a network of independent retailers and distributors. Zimbabwe is the 6th largest tobacco grower in the world and the largest in Africa.
BAT Zimbabwe has a strong portfolio of long-standing brands balanced across consumer segments and price points. The brand portfolio includes Dunhill, Newbury, Everest, Madison and Ascot.
According to Manatsa, export volumes of cut rag tobacco were up by 74 percent in the period under review, compared to the prior year due to increased demand of leaf from export markets.
Group revenue increased by 71 percent to $6,9 billion from $4 billion when compared to the same period in 2021.
“The increase in revenue was driven by price increases effected during the period and these factors resulted in a gross profit increase of $2,8 billion compared to the same period in 2021,” said Manatsa.
He said during the period under review, selling and marketing costs increased by 63 percent to $314,3 million compared to the same period in the prior year, driven by additional marketing investments aimed at driving sales volumes and general increase in costs due to inflation.
Group administrative expenses were 42 percent higher at $214,6 million higher than the same period in prior year driven by a general increase in costs due to inflation.
Other losses increased by $580,9 million due to the rapid devaluation of the Zimbabwean dollar in the period under review.
Manatsa said operating profit declined 90 percent to $1,4 billion compared to the same period prior year, while net loss attributable to shareholders for the period under review was $678,6 million, compared to a net profit of $1,4 billion in the prior year same period.
The group’s earnings per share decreased from $99,3 million to negative $32,9 million generated in the same period in 2021.
Manatsa said cash generated from operations was a positive $2 billion which is a 24 percent increase from prior year due to increased inflows as a result of price reviews effected during the period under review.
He said the company contributed $3,5 billion to the Zimbabwe Revenue Authority (ZIMRA) during the half year period.
Manatsa noted that the key contributors to the increase in the tax payments were Excise Duty and Corporate Tax driven by the increases in selling prices and currency devaluation.