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BAT Zim unit stuck with $7m in foreign shareholder dividends

Harare - The Zimbabwean unit of British American Tobacco (BAT) on Wednesday said interim cash and cash equivalents in the company have mounted by $7m as the company is unable to pay foreign shareholders and international suppliers, owing to foreign currency shortages.

BAT has had to push volumes for the lower end market brands to survive declining consumer purchasing power in the country. Officials at the company said consumers’ pockets are now tightly stretched by the current liquidity crisis that has seen banks run out of cash.

“Our cash and cash equivalents increased by $7m due to failure to remit dividends and delays (in) paying foreign suppliers.

"In terms of investment levels, there were no major investments,” Lucas Francisco, finance director at BAT Zimbabwe, said at a briefing in Harare on Wednesday.  

However, earnings per share for BAT Zimbabwe for the half-year to June stood at 22 cents while operating profit increased by 27% to $6.5m, added Francisco.  

Revenue for the period however declined from $16.7m to $16.6m, with the slide attributable to increased sales in the lower end market brands category at a time when the premium is stagnating.

“The period saw increased expansion of our low end market brand. And because we expand on our low price segment, that impacted on our revenue,” said Francisco.

Sales volumes for the period increased marginally by 2%, largely characterised by increased downtrading by consumers driven by affordability challenges, the company said.

Cash generated from operations was 23% up at $9.9m. The increase has been attributed to improved collections, increased profitability and delays in payments to foreign suppliers and a decrease in stock holdings.

In terms of tax payments, BAT Zimbabwe said its contributions to state revenues through excise duties, corporate taxes, VAT and withholding tax fell by 12% to $14.1m. The company blamed this on once-off Pay as You Earn costs in the previous contrasting period, which “arose from a staff realignment exercise in 2016”.

BAT is the biggest manufacturer of cigarettes in Zimbabwe, with over 80% of market share. It competes against Savanna Tobacco and other smaller and new entrants.

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