BAT dominates Zim cigarette market

clara.jpg

LISTED cigarette manufacturer British American Tobacco Zimbabwe (BAT) continues to enjoy dominance, accounting for 86% local market share based on excise duty contributions to the revenue authorities, a company official has said.

Fidelity Mhlanga

clara

BAT’s dominance is despite the entrance of new players in the cigarette manufacturing industry.

“Based on our independent survey we were at 79% but then we look at our contribution on the excise duty and believing that every cigarette player is paying excise we contributed 86%. Based on the excise regime that we have we can then directly translate our excise contribution to the share of our market,” BAT managing director Clara Mlambo (pictured) said on the sidelines of an analyst briefing on Wednesday.

Excise duty on tobacco, according to Mlambo, is US$20 per 1 000 sticks.

The company’s contribution of taxes in the form of excise duty, corporate tax, VAT, PAYE and withholding tax was US$32,5 million in 2016.

Mlambo said despite BAT’s continuous lead in the cigarette industry, overall sales volumes declined by 21% last year, with local brands sales tumbling by 21,5% compared to 2015 figures.

Cigarette consumption is normally regarded as inelastic, but this has not been the case in Zimbabwe where disposable incomes are not enough to cover the necessities.

“The industry shrunk. The reason why the industry shrunk last year is that a lot of consumers couldn’t access the money to buy products. There was a strain in the consumer disposals. The consumer has to make a lot (of) choices with the money they had and all this had an impact in the declining of our volumes,” she said.

The company’s global brand, Dunhill, grew by 7,2% compared to 2015, driven by a small but growing consumer base.

“What we saw last year, which also contributed to our volume decline, was the growth of non-duty-paying cigarettes in the industry because they were selling on the market at half the legitimate price. We have been doing conversations with Zimra around the issue,” Mlambo said.

BAT posted US$8,4 million after tax profit during the year ended December 2016, down from the US$15 million recorded in the same period last year.

The company’s total assets increased to US$31,7 million from US$28,9 million during the period under review.

Total revenues were US$34,1 million, a 25% reduction from 2015 mainly due to the decrease in sales volumes as a result of the economic situation.

Cash generated from operations was US$13,3 million, which is 13% down, to US$15,3 million achieved in the year ended December 31 2015.

The decrease was attributed mainly to a profit decrease offset by improved collections, delays in payments to foreign suppliers and a decrease in stock holding.

The company’s net cash generated from operations decreased by US$1,9 million mainly driven by low profitability which was offset by a decrease in working capital driven by lower stocks,

Net cash utilised in investment activities decreased by US$0,4 million due to low capital expenditure.

Mlambo said net cash used in financing activities decreased by US$11,5 million due to lower dividend paid in 2016.

Cash and cash equivalent increased by US$8,5 million due to challenges in paying suppliers and remittance of dividends.

Going forward, Mlambo said the business environment is expected to remain challenging in 2017, particularly in view of the foreign payment bottlenecks and continued strain on disposable income.

Top