The COVID-19 pandemic has not spared British American tobacco Zambia (BATZ) as it put to test the Company’s agility and its capacity to react, adapt and administer crisis management mechanisms to ensure sustainability in a volatile business environment.
Generally, the COVID-19 Pandemic has been characterized by lockdowns and severe restrictions that prompted the Company to implement Business Continuity Plans which include increasing stock holding durations for raw materials, imported finished goods and spares (SENS, 2021). However, the Company faced substantial business and operational disruptions, which have included reduced time in trade, as well as unbudgeted costs related to the purchase of COVID-19 personal protective equipment as per the Ministry of Health guidelines. Nevertheless, the company remains optimistic that it will continue to invest in its labour force and brands as it navigates through the challenges posed by the COVID-19 pandemic.
According to the company’s abridged financial statements published on SENS, the company recorded an increase in turnover of 48.8% amounting to K343.2 million during the period under review (2020) compared to the K230.6 million recorded in the same period in 2019. The increase in turnover was largely driven by improved revenue resulting from a price increase on our key brands.
The total cost of operations increased by 36.5% to K288.9 million reflecting the impact of the increased cost of production. The increase in operating costs was mainly driven by the cost of tobacco leaf and wrapping material imports (SENS, 2021). Operating margin increased by 92.2% percent from 8.2% in 2019 to 15.8% in 2020. The increase was mainly as a result of an increase in price for BATZ key brands. According to the abridged financial statements for the period ended 31 December 2020 BATZ recorded a loss before taxation of K36.9 million compared to K25.1 million recorded in 2019. This increase was largely attributed to the high financing costs the company experienced in 2020 as the borrowing facility was denominated in US dollars while the Zambia Kwacha significantly depreciated in the period under review.
In view of the Company’s financial performance highlighted for the period, the directors do not recommend the payment of a final dividend for the year ended 31 December 2020. Further, no interim dividend was declared or paid for the year ended 2020 in order to focus on liquidating the loan obtained to finance the factory construction (SENS, 2021).
According to SENS (2021) the Fifty Ninth Annual General Meeting of the Shareholders of British American Tobacco (Zambia) Plc (“the Company”), will be held virtually and at Radisson Blu Hotel, Lusaka, on Thursday 15th April 2021 starting at 10:00 hours to discuss several other issues including the financial statements and audited report.
