CIGARETTE and tobacco manufacturing company, British American Tobacco Zimbabwe (BATZ) posted a loss of $27,7 million for the year-ended December 31, 2019 owing to hyperinflation.
BY TATIRA ZWINOIRA
The economy continues on a loss-making streak of major listed firms which are posting losses due to the depreciating Zimbabwe dollar that is driving hyperinflation. BATZ posted the loss for the period under review from a profit after tax of $95,37 million.
In its results for the period under review, BATZ said due to hyperinflation accounting, there was $90,8 million, a 348% increase on net monetary movements mainly driven by the restatement of opening retained earnings.
“As a result of the above, operating profit decreased by $162,1 million (104%) versus the same period in prior year, to close at a loss of $5,8 million,” said BATZ chairperson Lovemore Manatsa, in a statement accompanying the results under review.
“Net loss attributable to shareholders for the period under review was $27,7 million compared to a profit of $95,3 million in the previous year, representing a 129% decline. Headline earnings per share were $4,32 per share compared to $5,89 per share the previous period.”
Manatsa said revenue decreased by $16 million (5%) on an inflation-adjusted basis to $329,44 million compared to 2018, driven by declining sales offset by numerous price increases.
The company reported that during the period under review, the official exchange rate had very little significance to the productive sector because of the inaccessibility of foreign currency on the interbank market.
This comes as the local currency weakened considerably against major trading currencies, further impacting consumer disposable incomes.
“Inflation increased to 521% by the end of December 2019 against 42,1% in December 2018. This increase depicted the worst annual outturn in eleven years and triggered a return to hyperinflation in the Zimbabwean economy,” Manatsa said.
He added: “Power shortages persisted resulting in heavy reliance on generators which largely contributed to decreased productivity and increased operating costs for the company. It is in this context that the company presents its audited financial results for the year-ended December 31, 2019”.
However, despite the poor performance, selling and marketing costs decreased by $10,5 million while administrative expenses were $23,3 million lower than the previous year, driven by cost-saving initiatives.
But other expenses driven by foreign exchange losses on liabilities driven by the devaluation in the Zimbabwe dollar against the United States dollar increased by $62,1 million, a 398% increase compared to 2018.
“Total current assets were $189,4 million representing a $93,7 million decrease (33%) compared to $283 million in 2018, driven by a decrease in cash balances. Total current liabilities of $142,8 million were $60.8 million lower (29,8%) against $203,6 million driven by a reduction in trade payables,” Manatsa said.
“Cash generated from operations was a negative $17,9 million representing a $242,6 million (108%) decrease from the $224,7 million generated in 2018. This was due to a decrease in profit, increase in inventories (due to tobacco purchases for the cutrag export business that commenced in March 2020) and a decrease in payables.”
BATZ posted losses despite its contribution to the Zimbabwe Revenue Authority in taxes increasing by 138% from $42,5 million in 2018 to $101,3 million in 2019.
BATZ’s struggles comes as the Reserve Bank of Zimbabwe is working on settling US$15,2 million in blocked funds for the company.