- Category: Stories
- Published on Sunday, 16 January 2011 16:16
- Written by Charles Rukuni
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Tobacco heavyweight, TSL, saw its net profit for the year ending October soar by 576 percent, beating annual inflation for that month of 525 percent though tobacco production had declined by 50 percent and the company auctioned only 55 percent of the 82 million kg produced.
Turnover rose by 331 percent from $16.2 billion to $69.6 billion while operating profit increased by 550 percent from $7.5 billion to $48.5 billion.0
The company, which borrowed $13 billion to finance its contract growing scheme, ended up paying $4 billion in interest, up from $697 million the previous year.
Though tobacco production was down it had a net profit of $31.1 billion, which was a 576 percent increase from the $4.6 billion it realised the previous year.
It says the change of the exchange rate for tobacco from $159 to $800 to the greenback helped offset the decline in volumes auctioned.
The new payment system under which growers will receive 25 percent of the price under the official exchange rate and 75 percent under the auction rate would go a long way in restoring viability to the tobacco sector.
It was also going to have a favourable effect of TSL's contract growing scheme which was approved by the government in September.
According to the results, volumes at Agricura were down by 40 percent because of the sharp decline in sales of tobacco chemicals.
The division had embarked on aggressive marketing of chemicals for the horticultural market where there was opportunity for growth.
Hunyani, also a listed company, had seen its contribution to the group's profits increase by 564 percent largely due to exports to Zambia and Kenya.
Profits at Bak Storage were adversely affected by the low tobacco output as well as by declining disposable incomes, but there was strong demand for storage of general cargo.
Cut Rag consolidated its position both on the local and export markets for cigarettes with profit beating inflation.