LUSAKA- BAT Zambia, Zambia’s top cigarette manufacturer has said it expects a sharp decline in profitability, warning its shareholders to exercise caution in dealings of its shares on the LUSE.
“Headline earnings per share for the half-year ended 30 June 2019 are expected to be approximately 90% lower than that for the half-year ended 30 June 2018” reads a profit warning statement published on the LUSE
The company said the movement in profitability and earnings per share is mainly attributed to the increase in finance costs resulting from depreciation of the local currency against the United States Dollar, impacting the cost of borrowings which are denominated in USD.
In the full year to December 2018, BAT Zambia reported a loss of ZMW16.1 million, sustaining a loss making trend for the second year running and this trend is likely to continue. million.
The sustained loss 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. Some of the intervention measures include managing of foreign exchange risk.
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