BAT net profit down 9% to Shs8.9bn

The company continues to demonstrate resilience amidst a challenging operating environment, characterised by a high prevalence of illicit trade

Kampala, Uganda | JULIUS BUSINGE | Cigarette seller, British American Tobacco has reported a reduction in net profit from Shs9.8bn for the year ended December 2022 to Shs8.9bn for the year ended December 2023, reflecting lower revenue according to company executives.

Gross revenue reduced by 14% to Shs86.0 billion primarily driven by lower sales volume. Excise duty and Value Added Tax (VAT) decreased by 19% to Shs 41.1 billion reflecting the impact of illicit trade on sales volume.

The total cost of operations decreased by 8% to Shs31.9 billion in line with lower sales volume, higher input costs, and offset by prudent cost management initiatives according to company executives.

Meanwhile, taxes in the form of Excise Duty, VAT, and Income Tax decreased to Shs46.2 billion, driven by lower sales volume and reduced profit.

The company’s assets reduced from Shs27bn in 2022 to Shs28bn in 2023. Current liabilities increased from Shs11bn in 2022 to Shs10.6bn in 2023.

Operating Environment

The company continues to demonstrate resilience amidst a challenging operating environment, characterised by a high prevalence of illicit trade in tax-evaded cigarettes as well as the cost-of-living pressures that adversely impacted consumer purchasing power.

It is estimated that illicit trade in tax-evaded cigarettes (estimated at 29% based on third-party research) denies the government the much-needed tax revenue, approximated at Shs30 billion annually.

Illicit trade also continues to undermine legitimate industry revenues. Illicit cigarette products are characterised by a lack of tax stamps, absent or altered graphic health warnings, and contain flavours.

“To address the illicit trade menace, we reiterate our call for a multi-agency approach to ramping up enforcement of tobacco control regulations,” executives said, “Looking ahead, we are confident in our ability to navigate the increasingly challenging operating environment, powered by our world-class talent, consumer-centric brand portfolio, and sustainable trade partnerships. This is anchored on our robust Environment, Social, and Governance (ESG) agenda.”

Third-party research indicates that most illicit cigarettes are mislabeled as exports or smuggled in from neighboring countries. Uganda is reportedly also increasingly becoming a source of illicit cigarettes in regional markets such as Kenya.

Samuel Njoroge, the company’s finance manager said, that notwithstanding the challenges faced, the company remained profitable with strong cash generated enabling the directors to recommend a dividend to shareholders.

The Board of Directors has proposed a final dividend for the year ending December 31, 2023, of Shs181 per share, to be recommended for shareholder approval at the Annual General Meeting to be held on July 4, 2024.

The dividend, which is subject to withholding tax, will be paid on or about July 25, 2024, to shareholders on the register at the close of business on June 13, 2024.