BAT | BAT Zimbabwe 1H23 Earnings Update; Volumes retract 15% on account of ZWL liquidity crunch

The operating environment remained challenging in the period under review characterized by a volatile currency and hyperinflation. Subsequent tightening of monetary conditions by authorities created local liquidity constraints for both business and consumer. Lower real disposable incomes also impacted demand resulting in volumes for BAT Zimbabwe sliding 15% y/y. However, optimal cigarette pricing strategies and revenue from cut-rag tobacco exports supported a revenue increase of 674% in historical terms from ZWL$4.79bn in 1H22 to ZWL$37.12bn in 1H23. Cash generated from operations increased by 344.47% to ZW$10.58bn driven by working capital management initiatives implemented during the period. Meanwhile, currency devaluation drove a 403% increase in cost of sales to $5.27bn from the prior year. In addition, exchange losses of $22.75bn driven by revaluation of foreign currency denominated balances due to devaluation of the ZWL during the period impacted profitability. Consequently, EBITDA declined 125.64% to a loss position of ZWL$444.33mn from ZWL$1.73bn. EBITDA margin subsequently swung from 36% in 1H22 to -1% in 1H23. Nevertheless, the Group registered ZWL$5.40bn in finance income and thus closed the year with a PAT of ZWL$3.04bn, up 141.43% from ZWL$1.26bn registered in the prior year. In light of this performance, BAT did not declare a dividend for the period under review.


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