Foreign currency scarcity ‘smokes’ out BAT

BRITISH American Tobacco (BAT) managing director, Clara Mlambo says the company is struggling to get foreign currency and has described 2018’s first quarter as “drier” than other first year quarters.

BY TATIRA ZWINOIRA

In an interview with NewsDay after BAT’s annual general meeting held at their premises in Harare last week, Mlambo said the main challenge in 2017 was foreign currency, which continues to persist.

“We are in the same boat. We are not an exporter, so we rely on what we get from the banks and this year, particularly quarter one, it has been drier than other quarters in terms of what we have been able to access from banks. So, it has been very tough, but we continue to engage the banks and we continue to look internally to see what else we can do,” she said.

“Head office will only assist us in terms of engaging with our suppliers to get longer payment terms, while we try to secure foreign currency to stop from being cut off supply. So that is the type of support we get from head office.”

Mlambo said even sourcing their packaging for the cigarette packs was difficult, as they had to import some raw materials to make the cigarette packs.

“The main challenge is still foreign currency because 90% of our other materials, we actually import, as they cannot be sourced locally. Even the materials that we source locally, like some of the packaging materials, our local supplier still has to import,” she said.

BAT uses foreign currency to import cigarette paper used to wrap the cigarette sticks and filters, with the latter being imported from Japan.

During the tour of BAT’s manufacturing plant in Harare on Friday, BAT head of operations, Moses Musarurgwa said that the cigarette paper is made from thin and lightweight non-wood plant fibres that cannot be sourced locally.

He said cigarette filters are a cellulose acetate made from wood pulp from a certain type of tree from Japan.

Both cigarette papers and filters are crucial in manufacturing a cigarette stick with BAT producing an average of 7,5 million sticks a day.


Mlambo said: “When I look at Q1 2018 compared to Q1 2017, we see encouraging growth and we expect the momentum to continue throughout the year.”

In a statement of its 2017 annual report, BAT chairman, Lovemore Manatsa said despite the company achieving fine results, the balance of payment pressures continued to constrain local companies.

“The domestic economy continues to experience headwinds, chief among these being balance of payment pressures, which continue to constrain the ability of companies to make payments for critical foreign supplies. The cash liquidity challenges, in addition to resurgent inflation at the back end of the year, have put pressure on the consumers,” he said.

In 2017, revenue grew about 8% to $36,76 million at the end of 2017 from a comparative of $34,06 million earned in 2016.

This helped profit-after-tax grow about 25% to $10,57 million in 2017, compared to $8,4 million in 2016 on the back of cost-cutting measures in an increase in volumes of their Madison, Everest, and Ascot cigarettes.

The company recorded an overall volume growth of 10% compared to the same period in the prior year driven by growth across the portfolio, which boosted revenue.

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