How the macro impacted BAT’s performance in 2020
Footwear

Amidst the turbulences of covid-19, British American Tobacco Zambia (BATZ) plc manages to sail through exceptionally with regard to operating profit but fails terribly to earn ‘tangible’ profit before taxes as the company falls into losses. During a period when most business have struggled and most succumbing to the business environment challenges, BAT plc performance has shown some form of resilience.

The Directors of British American Tobacco (Zambia) Plc presented the audited financial results for the Covid-19 plagued period ended 31 December 2020 with turnover increasing by 49% while boasting a 92% operating profit increase compared to a corresponding period in the prior year. This was ironic performance considering that the product line “school shoes” would have suffered due to kids remaining at home during the period.

 

The company recorded gross revenue amounting to K530M and net revenue of K343M in the year ended 2020 compared to the gross revenue of K388M and net revenue of K231M recorded in the year ended 2019. “The increase in turnover was largely driven by improved revenue resulting from a price increase on our key brands. 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”, alluded the company secretary Zoe Chisanga Chiliboyi.

 

The increase in the total cost of production was so much that it impacted the profit before tax levels severely. Supply chain bottle neck costs surged which had a trickledown effect attributed to losses on the exchange rate as well as accelerating inflation. BATZ, incurred production costs amounting to K91M in the just ended year compared to the K44M incurred in the year ended 2019. The severe increase in cost of production pushed the Company to make losses before taxation amounting to K36.9M compared to the losses before taxation in 2019 of K25.1M.

 

As noted in the financial publication for the year ended 2021, “the increase is largely attributed to higher finance costs in 2020 due to the Company’s borrowing facility being denominated in US$, and the Zambian Kwacha depreciation during the year.” earnings per share dropped to

 

However, the company did record an increase in current assets mainly due the huge increase in bank balance and cash. BATZ recorded a net inflow of cash amounting to K51M for the period ended 2020.

 

Due to the net losses incurred, the Directors have decided not to 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. The Directors recommend that the short-term focus for the business be on the liquidation of the loan which was obtained to finance the factory construction.

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