Business environment still challenging: BAT

HARARE - Zimbabwe's largest cigarette manufacturer, British American Tobacco (BAT), anticipates the business environment to remain challenging in the short to medium term, despite government overtures to improve the business climate.

BAT managing director Clara Mlambo yesterday said while President Emmerson Mnangagwa’s government has adopted a deliberate policy stance to attract investment and improve the doing business environment, the operating environment remained challenging.

“While we are optimistic about the future and encouraged by the new policy changes and pronouncements, the business environment is expected to remain challenging particularly in view of foreign payments, cash availability and disposable incomes.

“The president has openly declared that the country is open for business and this gives us hope, however, in the meantime, the situation remains difficult,” Mlambo told an analysts briefing of the company’s 2017 financials.

Notwithstanding the notable GDP growth for Zimbabwe in 2017, the domestic economy continues to experience headwinds, chief amongst these being balance of payment pressures, which continue to constrain the ability of companies to make payments for critical foreign supplies.

The cash liquidity challenges, in addition to resurgent inflation at the back end of the year have put pressure on the consumers.

Meanwhile, BAT’s total sales volumes for the year ended December 31, 2017 increased by 10 percent compared to 2016.

“This strong performance was driven by increased volumes in all categories with the company’s Low Value for Money segment recording a 460 percent growth. Our Global Drive Brand, Dunhill, achieved a growth of one percent,” Mlambo said, pointing out that this was despite the unrelentingly difficult and challenging economic conditions the country is going through.

Revenue increased by $2,7 million, an eight percent increase on 2016 mainly driven by the strong sales performance.

“Consequently, gross profit was up by $2,0 million (eight percent) compared to the same period in 2016, in line with the volume increase combined with effective cost management measures taken by the company,” she said.

Selling and marketing costs increased by $800 000 compared to 2016 as a result of increased investment into marketing activities supporting of the cigarette manufacturer’s Ascot brand.

“Administrative expenses were $2,7 million lower than the previous year which is 26 percent lower compared to 2016, driven by a reversal of tax-related provisions, once off restructuring costs and savings initiatives implemented during the year under review.

“Other income increased by $800 000 (47 percent) compared to the same period in the prior year, as a result of increased income from royalties. Operating profit grew by $4,7 million (39 percent) compared to 2016, to close at $16,6 million,” the BAT boss said.

Net profit attributable to shareholders for the period was $10,6 million compared to $8,5 million in the previous year or a 25 percent growth.

The board declared a final dividend of $0,29 per share.

“This, together with the interim dividend of $0,22 per share declared during the previous year, will bring the total dividend for 2017 to $0,51 per share,” Mlambo said. — Financial Gazette

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n - 23 February 2018

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