HARARE - Zimbabwe's largest cigarette manufacturer British American Tobacco (BAT) grew its net profit by 15 percent to $15,5 million in the full year to December 2015 from $13,4 million registered in the previous corresponding period in 2014.
The company’s finance director, Lucas Francisco, yesterday told analysts that total sales volumes for 2015 declined by nine percent compared to 2014.
“The sales volumes for the local brands declined by 10 percent while our global drive brand, Dunhill, grew by 12 percent albeit in the context of a lesser market share,” he said, adding that the decline in volumes was driven by the challenging economic environment, which also led to a contraction in the total market size.
Last year, Zimbabwe halved its economic growth forecast to 1,5 percent this year from 3,2 percent, blaming a drought that hit agricultural production.
The country’s economy is suffering from power shortages and lack of foreign investment, while companies are cutting jobs as they struggle to pay salaries.
Staff costs are hitting the public sector too, with more than 92 percent of government revenue being used to pay civil servants’ wages.
BAT Zimbabwe — a subsidiary of London-based multinational tobacco processor BAT plc — saw its revenue increasing by $0,70 million to $45,2 million compared to $44,5 million recorded in 2014, driven by marginal gains from pricing net of the impact of the excise increase in November 2014.
Francisco said the company’s gross profit improved by 12 percent to $32,4 million mainly as a result of reduced raw materials prices, productivity initiatives and cost containment measures in our manufacturing operations.
“Selling and marketing costs decreased by $0,3 million compared to 2014 due to distribution efficiencies and cost containment initiatives,” he said adding that administrative expenses were 28 percent higher compared to same period in the prior year.
“This was largely attributable to higher service fees as a result of the implementation of a new Group wide management system which will increase efficiencies and saving opportunities.
“In addition, the company incurred once-off costs associated with a staff rationalisation exercise,” he said.
The cigarette company, which controls 82 percent market share in Zimbabwe, embarked on a retrenchment exercise that claimed the scalp of 13 employees and also saw long-serving managing director Lovemore Manatsa and financing director Peter Doona resigning.
Francisco noted that other income includes proceeds from the disposal of a warehouse situated in New Ardbennie, from which the company recorded a profit of $1,4 million.
“As a result of the above, operating profit grew by $3,0 million compared to 2014, to close at $20,8 million.
Net profit attributable to shareholders for the period was $15,5 million which was up by $2,0 million compared to 2014. This represents an increase in earnings per share to $0,75, up from $0,65 in 2014,” he said.
In the period under review, BAT’s cash generated from operations was $15,3 million — representing an increase of 81 percent from $8,5 million generated in 2014.
Francisco said the increase was mainly due to delays in obtaining exchange control approvals for payments to foreign suppliers, and the timing of payments for leaf purchases.
Shareholders of the blue chip firm will earn a total dividend of $0,91 per share after the company declared a final dividend of $0,44 and had given an interim dividend of $0,47 per share.