- 38% drop in revenue to ZWG248 million, a 9% decrease in sales volumes
- Despite posting a net loss of ZWG175.95 million, BAT paid over ZWG100 million in various taxes
- While facing monetary instability, BAT achieved some cost optimization, reducing production costs to ZWG47 million and administrative expenses
Harare- British American Tobacco (BAT) Zimbabwe has posted a dismal half-year (HY) performance for the full year 2024, despite paying over ZWG100 million in government taxes.
The leading producer and distributor of tobacco products reported an earnings plunge, with revenue going down by 38% to ZWG248 million.
This decline was driven by a 9% decrease in sales volumes.
According to Lovemore Manatsa, the company's Chairperson, sales volumes declined due to a change in functional currency and shortage of the new currency.
"Sales volumes declined due to a change in functional currency and shortage of the new currency."
The shortage of local currency significantly impacted sales, as consumers opts to purchase cigarettes in smaller quantities. However, smokers used US dollars to buy more cigarettes where smaller denominations where not available and this should have mitigated the impact.
The real challenge lies in excessive taxes, high operating costs at the national level, and the rampant smuggling of cheap cigarettes into the country.
These factors erode revenue and undermine competitiveness. While the shortage of local currency affects sales, taxes and illicit trade pose a more significant threat to sustainability.
Despite the subpar performance, the company's taxes, including excise duty, corporate tax, value-added tax, customs duties, PAYE, and withholding taxes, amounted to ZWG112 million.
This makes the local operating environment challenging, as nearly half of the revenue was eaten up by taxes paid to the government.
Zimbabwe's taxes are considered too high, making it difficult for companies to thrive.
The country's high tax regime hampers companies' profitability. Companies like Inscor, Delta, Zimplats, have potential billion-dollar revenues, but excessive taxes such as Zimplats' US$258 million tax payment in 2021 hinder growth.
BAT's financials reflect this challenge. Gross profit decreased by 41% to ZWG200.89 million from ZWG339.43 million, while operating loss widened to ZWG145 million from ZWG61 million.
Net loss ballooned to ZWG175.95 million from ZWG38.41 million.
However, cost optimization efforts yielded positive results. Production costs decreased to ZWG47 million from ZWL60 million, and administrative expenses went down to ZWG33 million from ZWG42 million.
The operating landscape was characterized by monetary instability and substantial exchange rate distortions.
Equity Axis News.
