BAT Zimbabwe recorded a 17% volume decline across its local brand portfolio for the year ended 31 December 2013 and management is expecting trading conditions to remain challenging in the face of a stagnant economic backdrop, MD Lovemore Manatsa told an analysts briefing earlier today.

 

"We expect the trading environment to be quite difficult due to a stagnant economy."

 

On excise duty he said they managed to engage the ministry of Finance and other relevant authorities and the result of that was a no increase in the duty which was good for the business.

 

"Therefore, we get a chance or opportunity to rebuild our volume base which has been declining year-on-year since 2011," he said.

 

Furthermore, he told analysts that as a business they are focusing on strategic leadership agenda in order to grow volume and value in 2014.

 

Manatsa indicated that they will continue to invest in Zimbabwe both through the commercial business and through contract purchases of a significant amount of tobacco.

 

Giving the key business highlights group FD Peter Doona said the decrease in volumes is attributed to reduction in market size following 30% price increase taken in December 2012 against a 50% excise increase to $15 per mille.

 

"The industry volume decline was exacerbated by the stagnant economic backdrop, the lack of disposable income for consumers and the shortage of coinage for change resulting in consumers often paying higher prices than those recommended by manufacturers.

 

"Dunhill volume growth of 48% versus 2012 off a niche consumer base was boosted by new 'Switch' variant. Our marketing activities have mainly focused on recommended retail price compliance and support of the firm's drive brand Madison," he said.

 

As reported in the HY13 he further noted that the firm discontinued cut rag exports to Mozambique in June 2013.

 

Moving on to the financial highlights, Doona indicated that revenue went down 14% "mainly due to discontinuation of Cut Rag exports to Mozambique."

 

For manufactured cigarettes, he said, price increases net of excise on key brands in December 2012 mostly offset the impact of lower sales volumes.

 

He indicated that gross profit increased by $0.2 million to $30.12 million mainly driven by cost reductions and the business' focus on more valuable and profitable business of manufactured cigarretes since they terminated the Cut Rag exports.

 

"Our operating profit reduced to $9.833 million in 2013 (versus $17.61 million in FY12) primarily as a result of the share-based payment expense of $10.94 million associated with the Employee Share Ownership awards to employees," said Doona.

 

Profit for the year went down to $3.773 million in the period under review against $12.26 million recorded in the prior period.

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