BAT feels Covid-19 heat

The outbreak of the Covid-19 pandemic had an adverse effect on many consumer oriented stocks and British American Tobacco Zimbabwe’s business was not spared.

During the nine months to September 30, 2020, BAT recorded an 8 percent decline in overall sales volumes compared to the same period last year due to waning consumer spend as well as the effects of the pandemic.

Zimbabwe effected a national lockdown on March 30, 2020 with business trading hours reduced coupled with movement restrictions. This was in addition to an already challenging business environment characterised by foreign currency shortages and high inflation.

“The trading environment continued to be challenging during the nine months ended 30 September 2020 driven by the impact of the Covid-19 pandemic, currency depreciation and rising inflation.

“The company has not been spared by these challenging factors which have resulted in the slowdown of economic activity across the country and depressed consumer spending,” said chairman Lovemore Manatsa in a trading update for the period.

Its premium brand, Dunhill returned to the market and resultantly it recorded a significant increase of 962 percent compared to the same period in prior year.

The aspirational premium brands, Newbury and Kingsgate volumes went down by 33 percent compared to the same period in prior year.

The value for money segment, (Madison and Everest) and low value for money brand (Ascot), saw a decline of 5 percent and 43 percent respectively.

Turnover, however, went up 31 percent in inflation accounting terms compared to the same period in the prior year comparable period.

Mr Manatsa said the growth was driven by price increases taken during the period as well as revenue generated from the export of cut-rag tobacco.

Despite the challenging environment characterised by low disposable incomes, management is upbeat of the group’s performance in the outlook period.

The group is also pinning its hopes on the foreign currency auction system which was introduced in June this year to enhance access to foreign currency in a fair and transparency manner as well as bring stability to the exchange rate.

Said Mr Manatsa: “While the trading conditions are expected to remain challenging for the rest of 2020 mainly driven by macro-economic variables and the effects of the Covid-19 pandemic, the company believes that it will deliver value growth for its shareholders.

“The foreign currency auction platform has opened access to foreign currency required for raw materials imports and has brought about stabilisation of the exchange rate which will
alleviate some of these challenging trading conditions.-heral.cl.zw