BAT Zimbabwe facing new challenges

Profit after tax went down 45.22 percent from $15.4 million in 2015 , its highest since 2012, to $8.4 million in 2016.

The profit margin also went down from 34.2 percent in 2015 to 29 percent.

As a result earnings per share (EPS) dropped from $0.75 in 2015 to $0.41.

In 2012 the company recorded EPS of $0.68 , which is $0.27 higher than the 2016 figure owing to depressed earnings.

However, the company has been paying dividends to its shareholders and is one of the few companies that are still paying a dividend on regular basis since dollarization.

Total assets fell by 5.7 percent from $33.6 million recorded in 2012 to $31.7 million in 2016.

Generally,  total assets decreased between 2012 to 2014 when they fell to $27.7 million before they started to increase in 2015 and 2016 but they are still below the 2012 level.

On the other hand, liabilities have been declining on average in the period between 2012 and 2014 before they started to rise in 2015 and 2016.

However, in general total liabilities fell by 5.6 percent in the period between 2012 and 2016, from $19.7 million in 2012 to $18.6 million in 2016, partly due to the absence of borrowings since 2013.

The financial review of BAT in the period between 2012 and 2016 shows that the company’s financial performance has started to deteriorate owing to the tough operating environment and the emergence of new entrants which are penetrating the market at lower prices relative to BAT.

Apart from new entrants, revenue is also threatened by the challenges the company is facing in importing some of its critical raw materials on time, a situation which chief executive, Clara Mlambo said they will try to solve by engaging banks to facilitate foreign payments.

Operating margins remain under pressure as the company endeavour to increase marketing efforts in order to defend its market share and in the interim, net profit is most likely to decline on the back of declining revenues and operating income.

BAT’s brand portfolio includes Dunhill, Kent, Lucky Strike and Pall Mall but these brands are much more expensive for a local market in the throes of a liquidity crunch and low disposable income.

Some of the competitors of BAT in cigarette manufacturing include Savanna Tobacco, Cavendish Lloyd Zimbabwe and Cut Rag Processors.-The Source

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