Kampala, Uganda — British American Tobacco Uganda Limited (BAT) has recorded an increase in profit after tax of Shs1.6bn to Shs13.7bn for the year ended December 2018 amidst the operational environment that the company's top management described as 'tough'.
Financial results released on Feb.14 shows that the company's net profit increased from Shs12.0bn in 2017 to Shs13.7bn in 2018.
BATU Managing Director, Mathu Kiunjuri, said the improved performance is attributed to positive outcomes from the company's productivity improvements, focus on the value brands and ensuring that it continues to provide consumers with the products based on demand.
Gross revenue increased by 3% from Shs149bn to Shs154bn during the same period under review driven by excise-led pricing in the market which was partially offset by lower volumes as a result of consumer affordability challenges and the adverse impact of illicit trade.
The cost of operations slightly went up by 1% from Shs49.3bn in 2017 to Shs49.8bn in 2018, though the company executives said the cost was partially offset by productivity improvement initiatives.
In addition, finance costs reduced significantly by Shs1.8bn as a result of lower overdraft utilisation following the positive change in the company's supply chain model which led to reduced working capital requirements.
Its assets increased from Shs43bn to Shs45bn in the period under review while its liabilities too went up from Shs11bn to 13.5bn.
In terms of tax contribution to government [excise duty, VAT and corporation], it increased by Shs4bn to Shs90.5bn in 2018 driven by full year impact of the excise increase effected in 2017.
"We continue to engage the government on the importance of a stable, predictable and fair tax environment to ensure sustainable business and government revenue growth," the company said in a notice.
The company's cash generated from operations increased significantly by 242% to Shs30.7bn driven by profit growth and reduced working capital requirements.
The Company Secretary, Nicholas Ecimu, said that BATU delivered a strong set of results in 2018 despite the illicit trade in cigarettes in the country which averaged at 22% in the year.
Sector players believe that illicit cigarettes are reducing the amount of duty-paid cigarettes and denying the government tax revenue.
The good news to shareholders is that earnings per share (or value per share) increased from Shs246 in 2017 to Shs280 in 2018 as a result of increased revenue and profitability as recommended by the Board of Directors.
The earnings per share are subject to approval by the annual general meeting to be held on May 22, 2019.
If approved, officials said that the dividend which is subject to withholding tax will be paid on June 21, 2019 to shareholders whose names appear on the company's share register at close of business on May 31, 2019.
The results came at a time the company's share price remained unchanged at Shs Shs30, 000 and its counter largely having no activity at the Uganda Securities Exchange.
A USE trading report for the year 2018 compiled by Crested Capital, a brokerage firm indicated that the company's counter remained dormant on the bourse throughout the year and its price flat at Shs30,000, unchanged since May 2016.
This happened even as the company reported an improved first half of 2018 performance with profitability increasing 76.23% to Shs6.17bn compared to Shs3.50bn in the same period of 2017.
Dealing with illicit cigarettes
According to Uganda Revenue Authority officials, smugglers take interest in Supermatch cigarette brands as they are bought cheaply from the neighboring Kenya and are profitable once they reach Uganda without being cleared.
Officials say that through their enforcement department, they have intensified supervision and intelligence information gathering and monitoring at the Busia Boarder and other borders to deal with the vice that is making government lose tax revenue. Available statistics indicates that URA collected Shs74 billion worth of taxes from cigarette imports in 2017 alone.