Tobacco processor, British American Tobacco (BAT) is expecting a significant drop in volume output in second quarter (Q2) of 2020 owing to disruptions on its operations in the current period as the nation observed Covid-19 lock-down rules.
This is despite good fortunes during the first three months to March of 2020 when the company recorded upward volume and revenue trends.
But since lock-down started on March 31, the company has been negatively affected by the general slowdown in economic activity.
“The economic environment is expected to remain challenging and the impact of Covid-19 will be evident in the second quarter. The business expects a drop in volumes in the second quarter due to trading for a few days in April 2020 and reduced operations in May 2020,” BAT said in its forecast.
The cigarettes-maker is also hoping for a favorable price regime of tobacco currently selling at the auction floors as this will also impact on its business going forward.
While globally, analysts have already alluded to a tough second quarter because of the Covid-19 situation, locally the situation is compounded by deep lying macro-economic factors unique to Zimbabwe such as hyper inflation.
However, during Q1, BAT recorded a 10 percent increase in volumes compared to last year while revenue also grew by over 700 percent relative to prior year as the company made upward price adjustments in line with inflationary developments in the economy.
“The Company recorded a 10% increase in volumes, compared to the same period last year, driven by various efficiencies from the new trade marketing tools that are being used by the Company,” “Turnover, on a historical cost basis, increased by 703% compared to the same period last year driven by price increases which were taken to manage the inflationary pressures faced by the Company,” it said.
The Company also commenced cut rag exports in March 2020 to assist in foreign currency generation.