British American Tobacco Zambia sees 17.1% Drop in Operating Profit in H1 2015

British American Tobacco Zambia (LuSE:BATZ) reported  an 11.7% year-on-year (y/y) decline in net profit to K21.5 million for the six-month period ended June 30 2015. Earnings per share came in at K0.10 (K0.11 in H1 2014):

The drop was primarily driven by:

• A 2.8% decline in revenue to K90.7 million (despite a 1.8% volume rise driven by sales in the low cost Safari product)
  
• The impact of a 15.9% depreciation in the Kwacha over the period on cost of sales
  
• A rise in employee costs
  

This caused operating profit to decline by 17.1% year-on-year to K30.8 million.

BATZ recorded a 27% y/y growth in cash generated from operations to K39.9 million. Net cash-flow for the period increased by 58% y/y to K23.6 million. The company declared an interim dividend on K0.08 per share (K16.997 million) to shareholders of record as of September 30 2015. The dividend will be paid on October 20 2015.

Outlook

In the outlook for the second half of the year, the chairman said:

Trading conditions are anticipated to remain challenging in the second half of the year against the backdrop of forecasted reduced consumer spending and decreased domestic investment caused by the monetary policy tightening.

Further, if the escalating problem of illicit trade in cigarettes remains unaddressed, we estimate a further slump in the legitimate industry volumes and resultantly reduced revenue contributions to the Government and shareholders.

The company remains committed to performing to its full potential in a challenging environment supported by a dedicated team.