13 June 2017

Zambia: Excise Duty Chokes Imported Cigarette

British American Tobacco Zambia (BATZ) expects to post a K4.8-million loss before tax for this half-year period because of the 400 per cent exercise slapped on cigarette importation.

As the result of this performance, the company plans to set up a cigarette manufacturing plant locally to benefit from the status of a local manufacturer.

Cigarette importers reportedly pay 400 per cent of the excise imposed on local manufacturers and during the start of 2017 the excise was increased for all players by 20 per cent.

According to a statement on the BATZ trading update on the Lusaka Securities Exchange (LuSE) issued yesterday the company anticipates a loss of K4,788,765 for the half-year period ending June 30 2017.

"The Board of Directors wishes to advise the shareholders of British American Tobacco Zambia that the company expects to record a loss before tax of approximately ZMW4,788,765 for the half year ended June 30 2017," reads the statement.

The statement issued by company secretary Valentine Kabonga states that the loss in profitability was primarily attributed to the "discriminatory excise" levied on importers versus local manufacturers of cigarettes.

"Importers pay 400 per cent of the excise imposed on local manufacturers and during the start of 2017 excise was increased for all players by 20 per cent," states the statement which has been approved by the LuSE, the Securities and Exchange Commission and the Stockbrokers Zambia Limited.

As the result of the situation, the company is in the process of revising its strategy which includes the possible construction of a local manufacturing plant subject to funding and other appropriate approvals.

"The company expects its results for the half year ended 30 June 2017 to be released on SENS and published in the local press on or about July 27 2017.

Accordingly, shareholders are advised to exercise caution when dealing in the Company's securities until publication of the results," partly reads the statement.

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