BAT Zimbabwe to engage government over excise duty
BRITISH American Tobacco Zimbabwe (BAT) will engage government over high excise duty charged on cigarettes with the view of persuading a cut in the tax, the Financial Gazette can report.
A roll back of the tax would ensure that the price of cigarettes remains stable.
Cigarette excise duty has increased by 186 percent over the past five years, making Zimbabwe’s cigarette excise rate one of the highest in the region.
Excise duty further raise costs and discourage manufacturers at a time when government is promoting ease of doing business.
This tax is passed on to consumers as the cost of cigarettes is reviewed upwards thus reducing the volumes sold by the company.
In 2012, excise rate increased from seven to 10 representing a 43 percent increase. In 2013 the excise rate increased by 50 percent to 15 from 10. In 2014 there was no increase while last year excise increased to 20 from 15, a 33 percentage points increase.
“On the consumer front, in the context of a difficult economic environment, it is imperative for the business to secure price stability for its consumers going forward,” said BAT Zimbabwe managing director, Clara Mlambo, while presenting the company’s outlook at an analyst briefing.
“In this regard, the company will continue engaging with government for a sustainable excise rate…The excise induced price increases coupled with the worsening liquidity challenges have strained consumer affordability making it difficult for the cigarette industry to grow its volume,” she said.
The company’s revenue for the half year to June 30, 2016 declined by 23 percent to US$16,8 million from US$21,7 million. The decline was due to reduced consumer affordability, cash shortages and constrained trading environment.
“We forecast that the trading conditions will remain challenging for the rest of the year,” said Mlambo.
She said the company’s market share remained steady at 80 percent during the period under review.
Gross profit reduced by 26 percent to US$11,9 million from US$16,1 million.
Cash generated from operations was US$8 million, which is a decrease of 25 percent against US$10,8 million achieved in the period under review. The decrease was mainly due to a profit decrease offset by improved collections and a decrease on stock holding.
Administrative costs rose by 36 percent to US$5,5 million due to retrenchment execise costs and service fees arising from the implementations of the new enterprises resources management system.
Operating profit declined by 47 percent to US$5,1 million from US$9,7 million.
The company declared an interim dividend of US$0,18 per share.
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