Price increase recovery to spur BAT volume growth

BATBy Rumbidzayi Zinyuke

Cigarette manufacturer BAT Zimbabwe says the speed at which the consumers recover from the recent industry price increases will determine the company’s level of growth in terms of volumes in 2015.

Speaking after the company’s analyst briefing, BAT managing director Lovemore Manatsa said the increase in excise duty in December 2014 had resulted in an industry price increase and the market is still recovering from it.

“Going forward, it will be a function of how quickly the market recovers. Because of the increase in excise, we have increased our prices from $1,30 to $1,50 on what we call our most popular category like Madison. If they adapt quickly we should see more less a similar performance to 2014 but with maybe a slight increase in terms of volumes.

“January and February have been quite sluggish, but it’s the norm in terms of our cycle. But as we go into Q2 up to Q4 we will see a quarter on quarter growth in our volumes. The key driver of our volumes will be the initiatives that we have put on the forefront,” he said.

He said the company will focus on promoting its big brands like Madison and Dunhill to push volumes.

Manatse said the BAT’s global contracted Zimbabwean crop requirement will be likely maintained at previous levels of 26 million kgs.

For the full year to December 2014, the company reported a $13,4 million profit after tax from $3,7 million in the prior year.

Total revenues were flat at prior year levels at $44,5 million but manufactured cigarette revenue grew by 6 percent.

BAT Finance Director, Peter Doona said gross profit reduced to $28,7 million from $30,1 million in the previous year, driven by higher packaging costs, utilities charges and an increase in refurbishment and maintenance costs.

He said operating profit increased to $17,8 million in the period under review from $9.8 million after prior year results were impacted by recognition of the liability for awards by the Employee Share Ownership Trust of $10,9m.

Trade and other payables reduced by $4,1 million due to early payment of Excise and a reduction in payables to related parties.

Doona said capex will be retained at last year’s levels and divided between the group’s manufacturing operations and distribution.

“On the distribution side focus will be on the commercial distribution whereas on the manufacturing side its productivity, quality and environmental safety,” he said.

The company increased its capital expenditure in the period under review to $2,2million from $1,2 million in the prior year which focused on manufacturing productivity initiatives and upgrades to factory infrastructure and improvements to the distribution fleet.

Volumes grew 4 percent on the prior year spurred by a 37 percent growth in the Dunhill brand sales.

Following the interim dividend of 30 cents , the board declared a final dividend of 50 cents per share.

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