BAT Posts a 21.6% Increase in Profit in Half Year Results.

British American Tobacco Uganda Limited has registered a 21.6% increase in net profit from Shs 3.7bn to Shs 4.5bn for the first six months of 2024, further showing the company’s continued growth trajectory.

The company executives said on Aug.2 that the macro-economic landscape was relatively stable as demonstrated by low inflation levels and foreign currency exchange rates that supported revenue growth.

Notwithstanding this relative stability, the Company’s performance was impacted by the high prevalence of illicit trade in tax-evaded cigarettes, which continued to shrink the legitimate market.

Third-party research indicates growth in illicit tobacco trade incidence, estimated at 34% in June 2024 versus 29% in December 2022. This growth further impacts industry revenues and deprives the Government of an estimated Shs 35 billion consequently affecting the overall economy.

Illicit cigarette products are characterized by a lack of digital tax stamps, absent or altered graphic health warnings, flavour features and are sold at significantly lower prices.

Meanwhile, gross revenue declined by 19% to Shs39.6 billion while Excise Duty and Value Added Tax (VAT) decreased by 27% to Shs 17.8 billion primarily driven by lower sales volume.

Consequently, net revenue declined by 10% to Shs21.8 billion. Total cost of operations decreased by 18% to Shs 15.2 billion reflecting the impact of lower sales volume, prudent cost management and efficiencies following a successful route-to-market business simplification completed in 2023.

This was further offset by rental income from leasing unutilized Company property to a third party. Profit before tax increased by 19% to Shs 6.5 billion primarily due to lower total cost of operations partly offset by lower net revenue.

Taxes in the form of Excise Duty, VAT, and Income Tax decreased by 23% to Shs 21.1 billion, driven by lower sales volume (lower Excise Duty and VAT), partly offset by growth in profitability (higher Income Tax). The Board does not recommend an interim dividend.

Going forward, executives said, “We are committed to our purpose to build A Better Tomorrow by reducing the health impact of our business and sustainably delivering shareholder value. We are confident in our ability to navigate the increasingly challenging operating environment, supported by our world-class talent, consumer-centric brand portfolio, continued investment in the simplification of our business, and sustainable trade partnerships.”

They also reiterated their call to government for a multi-agency approach towards enforcement of tobacco control laws to address the high prevalence of illicit trade as an enabler for legitimate industry sustainability.