Payments to the Government by cigarette manufacturer British American Tobacco Zimbabwe (BAT) for the six months ended June 30 this year, increased eightfold to ZW$173 million from ZW$19.9 million in 2019. BAT contributes to the Government treasury through various taxes, including Excise Duty, Corporate Tax, Value Added Tax, Customs Duties, Pay as You Earn and Withholding Tax.
“The key contributors of the increase in tax were Excise Duty and Corporate Tax driven by the increases in selling prices and profit before tax,” Chairman Lovemore Manatsa said in a statement accompanying the group’s results. The company’s total sales volumes for the first half of 2020 declined by 3 percent compared to the same period in prior year mainly due to shrinking consumer disposable incomes and the impact of the Covid-19 pandemic lockdown.
Despite the drop in volumes, revenue rose 20% to ZW$410.5 million from ZW$341.6 million. “The increase in revenue was driven by price increases taken during the period as well as revenue generated from the export of cut-rag. These two factors resulted in a gross profit increase of ZW$49.6 million (22%) compared to the same period in 2019.”
Selling and marketing costs declined by ZW$0.2 million compared to same period in prior year, driven by route to market initiatives aimed at managing the company’s distribution costs. Administrative expenses were 35% lower than the same period in prior year, driven by the business’s ongoing cost saving initiatives.
Other losses increased by ZW$116.4 million due to foreign exchange losses on liabilities driven by the devaluation in the Zimbabwe dollar against major trading currencies. BAT’s earnings per share surged to ZW$3.58 from ZW$0.91 generated in the same period in 2019.
Cash generated from operations was a negative ZW$13.1 million as a result of a significant increase in trade and other receivables due to prepayments to purchase leaf and an increased debtors’ book as a result of price increases taken during the period. With the introduction of the foreign currency auction platform, the firm hopes to access the much-needed foreign currency which the company requires to source raw materials for the production of our consumer centric brands.