Zimbabwe: BAT Sales Volumes Tremendously Increase

Source from:  Zimbabwe Independent 06/07/2011

CIGARETTE manufacturing giant British American Tobacco (BAT) has sold 649 million sticks of cigarettes in the current financial year to date. "Sales have increased for the first quarter ending April 30 2011," said finance director Richard Morgan in an interview at the company's 51st Annual General Meeting this week. Last year alone the company made sales totalling 1,183 billion sticks, which was below forecast for the year, but was 12% up on the 1,05 billion sticks sold in 2009. In their full year results, the company recorded a net turnover of US$22,9 million, up from US$15,1 million in 2009. Margins were depressed by 8% to US$7 million, resulting from an increase in variable costs, driven by an increased cost of leaf tobacco due to the transition from ZW$ to US$ based stock holding values. A reduction of excise duty by government as of January 1 has helped improve margins for the comparable period last year and this in turn also helped increase profitability inline with increased sales indicated. Excise duty totalled US$15,8 million the previous year being almost 50% of gross revenue at US$31,1 million. BAT manufactures, distributes and sells cigarettes through a network of independent retailers and distributors. The company has a cigarette manufacturing plant in Harare and sells cigarettes entirely in the Zimbabwean market. BAT also manufactures semi-processed tobacco (Cutrag) for export to BAT Mozambique. The company has acquired another cigarette making machine at a cost of £280 000 through the group and is expected to arrive this month. "The new machine will definitely increase production efficiencies as the company targets a high output," said Morgan. Last year, the company commissioned a new Protos 1 000 Cigarette-Making Machine which improved production and product quality. The company is targeting 1,4 billion cigarettes on the back of increased capacity. The finance director indicated that the company forecasts an operating profit of US $2 million for 2011. "We are very bullish about the company generating profits this current financial year," he explained. In the 1990s, BAT used to sell 2,4 billion sticks annually but production fell due to constraints during the hyperinflation era. BAT contracts small scale and commercial tobacco growers through a local business partner to support the company's local and international leaf demand. There was an increase of 75% to 25,9 million kgs in tobacco grown under contract in 2011, but this year tobacco deliveries are expected to be around 150-200 million kgs, the company expects an increase in their uptake. The company usually has huge cash outflows during the first half since it would be purchasing tobacco from auctions floors. Morgan indicated that the company is very bullish this current financial year as they will continue to generate profits. "The company will focus on growth in volumes and revenue through increased sales across the portfolio," he further explained. Enditem