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Enacy Mapakame : Business Reporter

CIGARETTE manufacturer British American Tobacco Zimbabwe (BAT) yesterday reported a 53 percent slump in profit after tax to $3,6 million for the half-year ended June 30, 2016 compared to $7,6 million in the prior year on weak consumer demand. Revenue for the period was 23 percent weaker to $16,8 million from $21,7 million recorded in the same period last year.Sales volumes also declined 20 percent from previous year due to a 21 percent reduction in local brands sales volumes as consumers shift demand to more basic goods and services.

However, its global drive brand, Dunhill grew 10 percent compared to same period last year driven by a small but growing consumer base.

BAT acknowledged that the challenging operating environment had a knock on effect on local cigarette sales.

“The trading environment remained

constrained during the period, characterised by weak consumer demand and an accelerated liquidity crunch, driven by the generally weak macro-economic performance,” said BAT chairman Mr Lovemore Manatsa.

Operating profit for the period was 47 percent weaker at $5,1 million while net profit attributable to shareholders fell to $3,6 million from $7 million recorded in the comparable period.

This resulted in a 51 percent reduction in earnings per share to 18 cents from 37 cents.

The group embarked on a staff rationalisation programme which contributed to a 36 percent increase administrative expenses for the period under review.

Cash generated from operations declined 25 percent to $8 million from $10 million achieved in the comparative period

due to a profit decrease offset by improved collections and a decrease on stock holding.

Management at BAT is, however, upbeat that the group will remain profitable, despite the current pressure on earnings due to a tight operating environment.

“We are happy we are still able to report a profit and can still reward our shareholders with a dividend in this economic environment,” said BAT managing director Mrs Clara Mlambo.

“We are positive as board and management, we still command 80 percent of local market share and this works to our advantage,” she said.

Equities analysts have warned 2016 earnings will be reflective of the strained economic performance as both bottom and top lines continue to shrink.

BAT declared an interim dividend of 18 cents a share.

The cigarette maker, which is valued at $252 million, is the second largest company on the local bourse by market capitalisation after beverages giant Delta which is valued at $811 million.

In yesterday’s trading, the stock maintained previous price levels of $12,20.