BAT agonises over cash shortages

HARARE - Zimbabwe's largest cigarette manufacturer, British American Tobacco (BAT), is failing to pay over $5 million in dividend to its offshore major shareholder due to cash challenges.

BAT finance director, Lucas Francisco, last week told the businessdaily that his company was negotiating with its major shareholder and local banks to salvage the situation.

The cigarette maker’s major shareholder is British American Tobacco International Holdings (United Kingdom) Limited, which holds a 42,98 percent shareholding and over 8,8 million shares in the Zimbabwe Stock Exchange-listed counter.

“Basically, the final dividend for 2015 and mid-year dividend for 2016 is still outstanding. We are looking at an amount of over $5 million.

“We have been engaging, but despite the dividends being on the priority list the fact is there is no money. So, the little cash that the country is generating is used to prioritise the key inputs that are required for production,” Francisco said.

Zimbabwe has been battling an acute cash shortage on the back of depleted nostro balances, leading to multi-national companies with shareholders outside the country failing to remit dividend to their respective shareholders.

Industry estimates indicate that transactions worth over $1 billion are on hold as local banks struggle to meet international payments on behalf of their clients.

The BAT finance director also pointed out that the country did not have money to facilitate the dividend payment.

“We are having a conversation with the shareholder on how to make it up to them; this is the conversation that is taking place at the moment with the main shareholder.

“As you can imagine, it is not our money we always have to consult the shareholder and find out what options we have to try and move that money

“But the priority remains to remit the dividend; if we fail to do that then we may have to explore other options,” he said.

In the year ended December 2016, BAT declared a final dividend of $0,33 per share. This, together with an interim dividend of $0,18 per share, will bring the total dividend for 2016 to $0,51, a decrease of 44 percent versus 2015.

The latest dividend declaration pauses fresh challenge for the company as the outstanding dividend piles.

Meanwhile, the cigarette company posted an $8,5 million profit in 2016, down from a prior profit of $15,5 million, weathering toughening economic conditions.

In 2016, BAT also saw a 21 percent slump in sales volumes as consumer disposable incomes shrunk, but managed to maintain its 79 percent market share.

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