We have extracted below the Chairman’s Statement from the 2018 annual report of British American Tobacco Limited (BATU.ug), listed on the Uganda Securities Exchange:
“Looking to the future, I am confident that we have the right strategic focus, people and resources to deliver continued growth in the years ahead.”
I am very pleased to report a strong set of results for the year ended 31 December 2018, with the business having continued to deliver value growth for shareholders in a tough operating environment in Uganda.
Macroeconomic Environment – a mixed picture
According to the African Development Bank Group, in 2018, Uganda’s real gross domestic product (GDP) growth was estimated at 5.3%, up from 5.0% in 2017. Encouragingly, greater investment in public infrastructure was the main contributor to growth – together with the agriculture sector which benefited from favourable weather conditions in 2018.
However, the country’s fiscal deficit, widened to an estimated 4.7% in 2018. This widening of the current account deficit is due to weakening trade balances, rising global oil prices and increasing capital goods imports related to the ongoing infrastructure development projects.
The investment in infrastructure projects, coupled with the Government’s ambition to address the cost of doing business in Uganda, is very welcome and we urge the Government to quicken the pace of implementation in order to meet the country’s economic transformation and development objectives.
Additionally, and despite some external pressures, the Shilling has remained relatively stable. Following a record low foreign exchange rate of Ushs 3,897 to the USD, back in September 2018, the Shilling has recovered, and actually appreciated since then.
However, Uganda’s economic progress during 2018 has not translated into significant growth in jobs. This lack of jobs growth has meant that poverty rates have not improved substantially, with consumer affordability challenges remaining. Nevertheless, we have maintained a strong market position and delivered a strong business performance as a result.
Gross revenue increased by 3% to Ushs 154 billion, driven by excise- led pricing in the market. This was partially offset by lower volumes as a result of consumer-affordability challenges and the adverse impact of illicit trade, which averaged 22% (Source: Quarterly Market Tracker) in 2018 and denied government much- needed revenue. The Company posted a profit after tax of Ushs 13.7 billion, a 14% increase compared with 2017.
Our approach to regulation
As a company with a longstanding record of compliance in the execution of our operations while delivering on our business objectives, we welcome balanced, evidence- based regulations to govern the way we operate. We pride ourselves on being a responsible corporate citizen and believe that a stable regulatory and taxation environment is crucial for business as well as for government and the consumer .
However, while it is a last resort, and where all engagement options have been exhausted, we reserve the right to challenge certain issues in court. This was the case following the enactment of the Excise Duty (Amendment) Act, 2017 which imposed different rates for locally manufactured products and those imported from the East African Community (EAC) member. As a result of this discriminatory tariff, BAT Uganda filed a legal challenge before the East African Court of Justice to contest the higher Excise Duty on cigarettes imported from other EAC Partner States, which is up to 36% higher than cigarettes produced locally.
Based on the performance of the Company outlined above, the Board of Directors recommend a final dividend in respect of the year ended 31 December 2018 of Ushs 280 per Ordinary Share to be recommended for approval by shareholders at the Annual General Meeting to be held on 22 May 2019. If approved, the dividend, which is subject to withholding tax, will be paid on 21st June 2019 to shareholders whose names appear on Company’s share register at close of business on 31st May 2019.
The right strategy for a sustainable future
Reflecting on the success of 2018, which has not been without its challenges, let me express my thanks and appreciation to my fellow Directors on the Board, to Management and to our employees for their tireless efforts to deliver business growth. I also thank our suppliers, customers and business partners for their commitment and valuable contribution to the continued success of the Company. Looking to the future, I am confident that we have the right strategic focus, people and resources to deliver continued growth in the years ahead.
Hon. Dr. Elly Karuhanga