BAT volumes decline

BAT Zimbabwe

CIGARETTE manufacturer and tobacco exporter, British American Tobacco Zimbabwe (BAT) has reported an 18% fall in volumes for the first quarter of this year owing to depressed demand.

In a trading update for the quarter ended March 31, 2023, BAT said the trading environment for the quarter was characterised by rising inflation and the continued devaluation of the local currency.

The firm also noted that value added tax increased to 15% from 14,5%.

 Last year, BAT paid US$17,5 billion in taxes which was a rise of about 59% from 2021 comparative figure.

This translated to depressed earnings for the firm, a subsidiary of the British American Tobacco Group, a UK-domiciled multinational firm into manufacturing and selling of cigarettes, tobacco and other nicotine products.

“For the three months ended March 31, 2023, the company experienced an 18% decline in volumes, compared to the same period in the prior year.

This was due to a decrease in demand, owing to a decline in disposable incomes for our consumers,” BAT said.

“Export volumes of tobacco leaf and cut-rug tobacco declined by 26% in the three months period under review compared to the same period in the prior year, due to subdued demand in our export markets.

“Pricing reviews made during the period, resulted in the company recording a growth in net turnover in historical terms, of 391% compared to the same period in the prior year.”

BAT said the challenging economic environment resulted in a continued decline in consumer spending.

“Notwithstanding the challenging environment, the company remains optimistic about the future and will continue reviewing its business model to ensure long-term sustainability and value creation to its stakeholders,” BAT said.

The negative growth experienced by the firm comes after it reported a decline of 7% in total cigarette sticks sold to 1,05 billion last year from a 2021 comparative of 1,13 million sticks.

The lack of real time gross settlement in the market made it more difficult for clients to buy their cigarettes, leading to a decline in volume.

Additionally, the group’s implementation of its smart pricing methodology resulted in more expensive prices in US dollars when compared to the prices of competitors.

“While the trading conditions are expected to remain challenging for the rest of 2023, mainly driven by macro-economic variables, the company believes that its current business strategy will deliver sustained value for its shareholders,” BAT said.

Driving revenue for the group last year was its cut-rag tobacco and leaf export sales since local volumes were depressed.

The combined total of these two sources of revenue was $18,3 billion, an increase of 74% from the previous year.

In 2022, the firm generated a near 50% increase in revenue to US$24,27 billion from a 2021 comparative of US$16,23 billion.

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