British America Tobacco (BAT) Zambia expects to announce half year financial results on 26th August that will be weaker than its 2018 half year performance, according to a statement from the company.
“In accordance with the Lusaka Securities Exchange Listings Requirements, the Board of Directors of British American Tobacco Zambia PLC hereby advises the Shareholders of the Company that the earnings per share and headline earnings per share for the half-year ended 30 June 2019 are expected to be approximately 90% lower than that for the half-year ended 30 June 2018”, read a statement issued by Zoe Chisanga Chiliboyi, BAT’s Acting Company Secretary on 23 August 2019 on SENS.
The company’s half year financial results which are set to be published in the final week of August, will show that profitability and earnings per share were weakened by finance costs. “The movement in profitability and earnings per share is mainly attributed to the increase in finance costs resulting from depreciation of the local currency against the United States Dollar (“USD”), impacting the cost of borrowings which are denominated in USD”.
The Zambian Kwacha, which is currently trading at K13 to US$ 1, has lost over 9.8% if its value during the first six months of 2019 and 29% in the last 12 months according to the Bloomberg Terminal and Financial analytics Zambia. This means that companies that have inputs into their value chains that are purchased in base currency have suffered immensely and such has been the case of BAT Zambia.
The company whose $25 million factory in Lusaka’s Multi Facility Economic Zone (LSMFEZ) which commissioned in 2017 made the bold decision to manufacture their core product locally to avoid excessive taxes. This led to notable improvements in their financial performance in 2018. However, a volatile currency implies there are parts of the value chain that are exposed to exchange risks.