BAT half year revenue slides 9% on cigarette price cuts
BRITISH American Tobacco posted a 9% decline in H1: 2018 top line revenue of K114.8million (about USD11.5 million) for the period January to June 2018, down from K126.4 million (about USD12.6 million) same period a year ago.
In a securities exchange regulatory note, LuSE listed BAT attributed the revenue slide to price reductions that management effected to drive sales volumes higher. BAT stated that it recorded a 58% volume growth in the period.
The company stated that it had commenced local manufacturing of some of its products at the Lusaka South Multi-Facility Economic Zone -LSMFEZ which the company confirmed would be officially opened in Q4:2018.
The company's half year financial statement also shows a drop in cash generated from operating activities by 43% as well as a further drop in tax contribution to the Zambia Revenue Authority -ZRA by 47%. The drop in tax contribution was attributed to the tax holiday that has been granted to the company during its current MFEZ investment period.
The tobacco industry has seen notable investment in local manufacturing facilities with BAT investing about US$15 million while competitors like Roland Imperial Tobacco have also commenced the expansion of their local manufacturing plants.
BAT will now be able to cut down on importing cigarettes and other tobacco products once the plant is fully launched. This is expected to lead to forex saves on the Zambian forex market and national treasury. The move is also expected to boost both demand for locally produced tobacco from commercial and emerging farmers.