We have extracted the financial summary from the abridged report of British American Tobacco Plc. Zambia listed on the Lusaka Securities Exchange under the share code BATZ.zm. BAT Zambia is Zambia’s most significant cigarette supplier with a product line including cigars, e-cigarettes and next-generation products.
The following is an excerpt from the abridged report;
The Company (“BAT Zambia”) recorded an increase in turnover of 34% amounting to K165.2million during the period under review compared to the K123.3 million recorded in same period in 2017. The increase in turnover was largely driven by a general volume increase across the portfolio of over 67%.
The increase in volumes sold was on the backdrop of the Company being able to compete favourably on price following the commencement of local production at the back end of 2017. The Company has in 2018 reaped the benefits of the first full year of local production thereby paying excise taxes at the rate of a local manufacturer. The investment in aggressive marketing and distribution initiatives embarked on during the year to regain lost market share also paid dividends in 2018 and added to the continuing positive trajectory of recovery on which the business has embarked on. Turnover in the financial results represents revenue, excluding excise duties.
An operating profit of K16.6 million was recorded compared to a loss of K9.3 million in 2017. This represents an increase of 278%. The increase in operating profit was driven by the increase in volumes and turnover as earlier highlighted. Coupled with that, the business engaged in smart cost management which enabled it to record savings while at the same time building efficiencies in vital areas of the business, especially in satisfying different stakeholder interests key among them our customers, employees, the government and regulators to mention but a few.
A loss before taxation of K16.6 million was record during the year 2018 and represents a 50% increase over the loss recorded in 2017 of K11.1 million. The loss before taxation was mainly due to high net finance costs driven by foreign exchange losses suffered on the US$15 million loan that the Company contracted in 2017 for the construction of the new factory. The Company is committed to ensuring that this liability is liquidated in the short to medium term in order to arrest the erosion of shareholder value. To this effect, various interventions have been employed and more are still being explored to manage the foreign exchange risk that this necessary liability carries. The Directors and management are confident and optimistic that the impact of this risk will be mitigated and managed going forward as the business starts yet another exciting year of continued growth and recovery.
Negative cash generated from operations of K58.4 million was recorded during the year compared to a positive K47.3 million recorded in the prior year. This represents a reduction of about 223%.
Contributions to the Government Treasury
The Company continues to be a key contributor to the Zambian Government treasury in various taxes key among them Excise, Corporate Tax, VAT, PAYE and Withholding Taxes. The Company re-affirms its commitment to ensuring that it remains compliant with all tax laws, regulations and various guidelines issued by the Zambian Revenue Authority from time to time in the administration of taxes. In this way, the Company continues to support the Government’s development agenda as outlined in the Seventh National Development Plan.
Good corporate governance is core to the BAT Group’s sustainability and our commitment to creating shared value. In this regard, BAT Zambia is committed to operating to the highest standards of corporate conduct and transparency and is registered to the Lusaka Stock Exchange (LuSE) in addition to having in place robust internal systems to ensure compliance with existing regulations and laws and ensure that we are conducting our business with honesty, integrity and transparency.
In view of the milestones BAT Zambia has achieved to date, the Company remains focused on further consolidating its performance and position in 2018 and beyond. We are committed to further stimulating business growth and maximizing shared value with all our stakeholders.
I take this opportunity to thank our shareholders for their support in 2018. Additionally, I am thankful to my fellow Board members for their continued guidance and commitment, as well as the management team for steering BAT Zambia to its current and future performance levels through a challenging period. Heartfelt gratitude is further expressed to our employees for their commitment to achieving BAT’s vision and mission anchored in our strategic focus areas; growth; productivity; winning organization; and sustainability.
We stand resolute in our belief that our quality brands, unique strategies, and pool of diversely talented people will deliver on shareholder value in 2019 and beyond.