Economic decline smokes out BAT

HARARE - Zimbabwe's largest cigarette manufacturer British American Tobacco (BAT) says its annual production for the year to 2015 fell from approximately 1,5 billion sticks to about 1,2 billion sticks, on the back of economic challenges.

The company’s head of manufacturing Moses Musarugwa yesterday attributed the decline to a tough trading environment which exerted pressure of consumer spending.

“Our production is not fixed, we produce based on demand. So, if demand is subdued we produce less,” he told the businessdaily said on the side-lines of the company’s annual general meeting in the capital.

Musarugwa said while the operating environment remained tough, BAT — a subsidiary of London-based multinational tobacco processor BAT plc — expected to churn out more sticks this year.

This comes as the cigarette manufacturer grew its net profit by 15 percent to $15,5 million in the full year to December 2015 despite registering a nine percent decline in total sales volumes.

“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,” the company said recently.

The cigarette manufacturer also noted that the decline in volumes was driven by the challenging economic environment, which also led to a contraction in the total market size.

Meanwhile, BAT managing director Clara Mlambo told shareholders yesterday that the group’s volumes during the first quarter had been lower than those recorded for the same period last year.

“Volumes were marginally below prior comparable period during the first quarter; this is because the economic conditions have been straining consumer spending.  However, we expect the figures to improve in the second quarter, anticipating to close the first half on a positive note due to a number of new strategies that have been put in place,” she said.

Mlambo said the group expected both sales and volumes to pick up during the second quarter on the back of BAT’s promotion with its Madison cigarette range.

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.


Comments (1)

who can afford tobacco in foil & filter when people are working for less than $0.25/day(sic)! all smokers are resorting to chikwarmba, chiminera & cannabis sativa. this substitution effect puts '000s of jobs on the line in the event that BAT finds the going getting tough. cry the beloved kantry(Alan Paton)

SaManyika Chaiye - 27 April 2016

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