BATS Uganda’s Performance Impacted by Illicit Trade in Tax-Evaded Cigarettes; Company Aims to Navigate Challenges through Transformation and Stronger Enforcement of Tobacco Control Laws
- What is the key challenge affecting British American Tobacco Uganda Ltd's performance in the market and how is it planning to navigate this?
- Illicit trade in tax-evaded cigarettes is significantly impacting the company's sales volume and revenue. BATU.ug aims to address this issue through calling for stronger enforcement of tobacco control laws. Furthermore, the company is focusing on its transformation journey, which involves simplifying the business, emphasizing consumer-centric brand portfolios and maintaining a winning culture to sustain shareholder value and contribute to socio-economic growth.
Key Insights
- The business performance of British American Tobacco Uganda Ltd (BATU.ug) was negatively affected by macroeconomic instability, high inflation, and the prevalence of illicit trade in tax-evaded cigarettes, which led to decreased sales volume.
- Legitimate industry volume and revenue continually declined due to the estimated 29% illicit trade by the end of 2022. Illicit products lack tax stamps, and appropriate health warnings, and are significantly cheaper, which increases their appeal.
- The company’s gross revenue reduced by 4% to Ushs 48.6 billion due to lower sales volume, despite an improved product mix.
- The total cost of operations decreased by 4% to Ushs 18.7 billion, corresponding with lower sales volume but offset by an inflationary increase in input costs.
- The profit before tax decreased by 2% to Ushs 5.5 billion, which was in line with lower revenue but partly offset by the decrease in the cost of operations.
- Taxes paid reduced by Ushs 1.1 billion, or 4%, to Ushs 27.2 billion, correlating with lower sales volume and reduced profit.
- BATU.ug did not recommend an interim dividend.
- The company is focusing on its transformation journey, aiming to reduce the health impact of the business and drive excellence in environmental management while ensuring robust corporate governance.
- For future growth, BATU.ug is confident that continued investment in simplifying the business, focusing on the consumer-centric brand portfolio, and maintaining a winning culture will deliver sustainable shareholder value and contribute to Uganda’s socio-economic growth.
Useful links
- British American Tobacco Uganda Ltd (BATU.ug) HY2023 Interim Report
- British American Tobacco Uganda on AfricanFinancials
- Corporate Website
About British American Tobacco Uganda (BATU.ug)
British American Tobacco Uganda Limited (BAT Uganda) grows and processes tobacco in Uganda and sells cigarettes and other tobacco products to the local market and for export. Brands sold by BAT Uganda include Dunhill, Rex, Sportsman and Safari. Tobacco is grown in 13 districts in Uganda through a network of tobacco farmers. The raw tobacco is transported to the BAT Uganda green leaf threshing plant in Kampala where it is processed and packed for local and export cigarette consumption. BAT Uganda also exports tobacco leaves to cigarette manufacturers in Europe, Asia and other African countries. BAT Uganda is a subsidiary of British American Tobacco Investments Limited. British American Tobacco Uganda is listed on the Uganda Securities Exchange
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