British American Tobacco’s (BAT-Uganda) shareholders will pocket Ugx. 406 per share following a bumper harvest last year.
According to the audited accounts for FY2020, BATU’s operating profit margins improved to 36.78% up from 29.75% last year on the back of reduced costs and excise tax contributions. The pre-tax profits rose by 30.05% to Ugx29.21Bn while after-tax earnings were up 27.28% from Ugx15.68Bn last year to Ugx19.96Bn
Total assets added 2.60% from last year to Ugx69.75Bn in 2020 driven by higher current assets, the net assets in the period were up 8.66%. Total liabilities fell by 10.35% while shareholders’ equity appreciated by 9.69%.
Earnings per share improved to Ugx407 last year: Ugx320 , Net asset value per share closed at Ugx981.58 from Ugx894.89 in 2019. Return on assets rose to 28.62% (last year: 23.07%) while return on equity jumped to 41.43% (last year: 35.71%).
Commenting on the results, BAT Uganda’s Managing Director, Kirunda Magoola said: “BAT Uganda’s business continues to show resilience despite the difficult operating environment, largely resulting from the ongoing COVID-19 pandemic, which had adverse effects on the economy and the trading environment, worsening an already challenging operating environment. ‘’
He added: To facilitate business continuity and build resilience, we continue to focus on ensuring employee health and safety and contributing to national dialogue on stability and predictability in the regulatory environment, which will support economic recovery.
“This multi-pronged focus underpinned the delivery of strong financial results for the full year 2020. Profit before tax increased by 30% driven by growth in profit from operations and higher net finance income. Gross revenue however reduced by 1% due to lower sales volumes, reflecting the impact of the COVID-19 pandemic.Net revenue increased by 5% to Ushs 79 billion primarily driven by an improved product mix on the back of lower sales volumes and cost saving initiatives undertaken to cushion the business from adverse impact of the COVID-19 pandemic.
He revealed that total cost of operations reduced by 5% to Ushs 50 billion.
“Reflective of the COVID-19 impact and importantly, an increase in the incidence of illicit trade in cigarettes, our contribution to Government revenues reduced by 5%.This is a significant change compared to the 6.1% increase recorded in 2019 and clearly illustrates the impact of tax-evaded cigarettes to industry and Government revenues.’’ He said
Estimates show that the Government loses approximately Ushs 30 billion in revenue annually (source: Trade Monitor Q4 2020).
Towards the end of 2020, the cigarette distributor commissioned third-party research which found that 17.4% of cigarettes sold in the Ugandan market were illicit.
Further, about 44% of illicit cigarettes sold in Uganda are smuggled across the border; primarily tax-evaded cigarettes from Kenya.
To address this problem, Mr. Magoola said, a multi-pronged approach would be most effective, including enhanced factory, border and supply chain control processes.