BAT continue to dominate the tobacco market

Published: 13 September 2013

British American Tobacco Zimbabwe Limited (BATZ) released a flat set of results showing a 0.5% increase in revenue to $23.1 million compared to $23 million in the prior period. BATZ continue to dominate across its product range with independent research showing BATZ with a market share of over 75%.

Trading volumes were 16% down to 636 million sticks across the local brand portfolio although Madison was resilient more than other brands. Dunhill grew volumes by 44% to 3.7 million sticks although from a small but growing consumer base.

The discontinuation of cut rag exports into Mozambique also helped to reduce cost of sales. Operating margins shrunk from 30.5% to 10.4% due to an IFRS 2 share based payment expenses of $10.6m. This expense represents the fair value of share awards made to employees by BATZ's Employee Share Ownership Trust (ESOT) as part of the company's compliance with indigenisation and economic empowerment legislation ($10.2 million) plus the associated payment of dividends to employees participating in the Trust of $0.4 million.

In a note to shareholders, Tonderai Maneswa and analyst with Imara Edwards says: "BATZ remains a solid business generating positive free cash flow and with minimum requirements for further capital expenditure.

Maneswa says that although demand for cigarretes is generally inelastic, giving the product a long-term demand base. Health deparments are placing pressure on smokers.

Imara Edwards advise clients to buy BATZ because: "The price has declined significantly post election results and we do not believe it will continue to slide beyond this point. Further the company is now compliant with the indigenisation law and this will give management more time to deal with other company business."

- businessdaily