British American Tobacco (BAT) Zimbabwe has recorded a profit of $13,5 million for the year ended December 2014 driven by volume growth of 4% and the impact of an excise driven price increase in December 2014.
BY TARISAI MANDIZHA
In 2013 the group recorded a profit of $3,8 million. In the period under review revenue grew to $44 562 000 million as compared to $44 597 000 in 2013.
BAT Zimbabwe managing director Lovemore Manatsa on Friday said the group had reported an excellent set of results given the current operating environment.
“We are very happy. If you look at what’s happening on the market, very few companies are producing good results,” Manatsa said.
“In terms of our order book for 2015 if you look so far this year January and February has been a bit sluggish but it’s the norm in terms of our circles. Beginning of the year normally is a bit difficult in terms of the trading environment, but as we go on into the second quarter, third quarter or the fourth quarter we see growth in terms of our volumes and that is the general expectation using the historical trends we have experienced over the years.”
In the period under review, gross profit declined by 4,4% to $28,8 million from $30,1 million in 2013.
Manatsa said this resulted from higher packaging costs due to growth in sales of the 10s-format brands, salary awards to employees, higher utilities charged and an increase in refurbishment and maintenance costs on the manufacturing equipment.
He said the reduction in gross profit was offset by reductions in selling and marketing costs of $0,5 million and administration expenses of $1,0 million compared to the previous year, driven by strong management focus on cost control.
During the period under review, on non-adjusted basis, operating profit increased to $17,8 million from $9,8 million in 2013
He added that cash generated from operations was $13,6 million , down from $25 million in the previous year. Cash flows in 2013 had benefitted from the termination of cut rag exports in the year, while 2014 cash flows were also impacted by the timing of payments for exercise and tobacco and due to the settlement of payables to related parties.
Capital expenditures increased to $2,2 million , from $1,2 million in the prior year.
Commenting on the company outlook, Manatsa said trading conditions were expected to remain challenging going into 2015 as the country continued to look for economic growth and stability.
“We have increased prices from $1,30 a pack to $1,50 (due to the excise duty) so it’s a 20 cents increase so it’s now a case of how consumers will adapt to the new prices,” Manatsa said.
“But if they adapt quickly we should see more or less a similar performance to 2014 but maybe a slight incremental.”
He said the key drivers for the group’s volume growth would be the initiatives that the group had put in place on the marketing front and basically are the route to consumers or the distribution foot print.
“We have now realised that the market is no longer formalised as what it used to be. Where we used to use mainly trucks to deliver products on the market we have put in place different combinations depends on where we are trading.
“If you look at the high density areas for example we have started deploying three wheeler motor cycles and two wheeler motor cycles or bicycles so that the agents we are working with are able to service the market more regularly because cash is tight,” he said.