BAT sales volumes slump 8% on depressed consumer spend, COVID 19

Author Name
Respect Gwenzi
Stock Market 2 weeks ago

Harare – Zimbabwe Stock Exchange Listed cigarettes producer, British American Tobacco (BAT) has recorded an 8% decrease in sales volumes for the nine months ended 30 September 2020 mainly due to reduced consumer spending and the adverse impact of COVID 19.

BAT produces some of Zimbabwe’s best-known cigarette products which include Madison, Everest, Dunhill, Newbury, Kingsgate and Ascot.

In March 2020 the Zimbabwean government introduced a COVID 19 induced lockdown that forced business to scale down on operations which adversely affected sales and profitability for almost all businesses including independent retailers responsible for the distribution of BAT products and this is reflected in the results.

Furthermore, the macro economic state in the country also had its toll on businesses with hyperinflation reaching a record high of 837.53% in July 2020 while the exchange kept on rapidly fluctuating which reduced consumer spending as salaries were not matching the inflationary rate.

In the recent trading update posted by the company, BAT reports that of all the products in the company portfolio, the premium brand Dunhill only recorded a significant increase in sales volumes, gaining by 962% against the same period in 2019 while the Aspirational Premium brands, Newbury and Kingsgate volumes declined by 33% compared to same period in prior year.

The reason for the gain in Dunhill sales is that, production of the cigarette brand had been ceased in the prior year and it only returned to the market during the period under review.

Madison and Everest which are in the company’s Value for money segment recorded a 5% decline in sales volume while the low value for money categorized product, Ascot saw a 43% decline in sales.

Despite the slump in volumes however, net revenue came in 31% higher than the comparable period in inflation adjusted terms driven by price increases taken during the period as well as revenue generated from the export of cut-rag tobacco.

Going forward the company intends to take advantage of the foreign currency auction system introduced by the central bank to harness foreign currency required for importing raw materials and are also ready to take advantage of the exchange rate stability that has been brought about by the same system to improve on the recently posted performance.

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