British American Tobacco Zambia Plc has presented its unaudited financial results for the period ended 30 June 2021 under the aptly titled banner of resilient performance amidst a challenging environment.
The following is the extract from the SENS announcement issued by order of the Board on 18th August 2021.
The operating environment continues to be constrained by the prevalence of the COVID-19 pandemic. The adverse effects of the pandemic on Zambia’s business environment and overall economy cannot be overstated. Over the period under review, a number of businesses suffered significant financial losses, and household incomes were adversely affected by the rising food and non-food inflation. This in turn has resulted in stretched consumer affordability. For the tobacco industry, this contributed to heightened illicit trade in cigarettes, in spite of restricted cross-border movement by government authorities in an effort to curb the spread of the COVID-19 pandemic.
The health and safety of our employees remains a priority throughout the duration of this pandemic as our Company strives to deliver shareholder value through various operational and sustainability strategies. To this end, the Company will continue to work with relevant Government agencies to ensure the maintenance of a stable and predictable regulatory environment as this plays a key role in supporting economic recovery.
Despite the challenging operating environment, increased investment behind our brands and support to our trade partners has seen our volumes grow by 14% versus same period last year. The Company recorded an increase in gross revenue of 48% amounting to ZMW334.1million during the period under review compared to the ZMW226.2million recorded in same period in 2020. The increase was mainly attributed to optimal pricing strategies and an improved product mix.
Net revenue increased by 53% to ZMW223.6million driven by the increase in gross revenue.
The total cost of operations increased by 38% to ZMW165.3million reflecting the impact of increased costs of production mainly driven by leaf and wrapping material imports which were impacted by the foreign exchange devaluation of the Kwacha against the United States Dollar.
Notably, the operating margin increased by 9.8 percentage points to 26.1% as a result of an increase in total revenues.
For the period ended 30 June 2021, the Company made a profit before taxation of ZMW39.9million compared to a loss before taxation in 2020 of ZMW26.4million.
The increase in profit is largely attributed to an increase in gross revenue arising from the optimal pricing strategies and improved product mix management employed at the commencement of the year.
Contribution to Government Revenues
The Company continues to be a key and compliant contributor to the Zambian Government’s Treasury through the payment of various taxes key among them; Excise, Corporate Tax, VAT, PAYE and Withholding Taxes. The Company’s contribution to the Zambian Government treasury in various taxes for the period to 30 June 2021 was ZMW114.7million (2020: ZMW80.0 million).
The Directors do not recommend the payment of an interim dividend for the six months ended 30 June 2021 because of the Company still being in a negative net equity situation year to date.