BAT profit up 25pct amid biting forex shortage

British American Tobacco (BAT) Zimbabwe managing director, Clara Mlambo

HARARE,– Cigarette manufacturer BAT Zimbabwe reported a 25 percent increase in net profit to $10,6 million for the full-year to December, 2017 from $8,5 million in the previous year on strong sales performance and lower costs.

Revenue rose by 8 percent to $36,7 million from $34,1 million in the previous year.

Sales volumes increased by 10 percent compared to the prior year on increased volumes in all categories with the company’s low value for money segment, Ascot brand, recording a 460 percent growth.

Operating profit grew by 39 percent to $16,6 million from $11,95 million in the previous year while cash generated from operations increased by 13 percent to $19,9 million from $17,6 million generated in 2016 on the back of an increase in profit.

Gross profit came in 8 percent higher at $26,76 million in line with the volume increase combined with effective cost management measures.

Selling and marketing costs increased by 19 percent to $4,8 million as a result of increased investment into marketing activities supporting the Ascot brand.

Administrative expenses fell by 26 percent to $7,6 million, driven by a reversal of tax related provisions and cost containment measures implemented during the year.

Owing to foreign currency shortages, finance director Leslie Malunga said the group’s cash and cash equivalent increased by $9,1 million due to challenges in paying suppliers and remittance of dividends while trade and other payables also increased by $5.6mn due shortage of foreign currency.

Chief executive Clara Mlambo told analysts that the company is engaging bankers to address over the shortage of hr currency to meet its obligations.

“We are facing challenges in terms of making payments for raw materials (to foreign suppliers). We continue to engage with our bankers for a resolution on all our outstanding payments. As such in the short to medium term this continues to be a critical challenge,” said Mlambo.

Additionally, Mlambio said the company invested $400,000 in improving its machinery during the year under review to keep up with increased volumes.

Total assets increased to $37,9 million in the period from $31,7 million previously.

The group declared a total dividend of 51 cents per share. – Source