British American Tobacco Uganda (BATU) Limited has said the first half of the year was characterised by a challenging operating environment occasioned by the Covid-19 pandemic as well illicit trade of tax-evaded cigarettes.
“The COVID-19 pandemic continued to adversely impact the business due to restrictions and the general decline of consumer disposable incomes,” says the company statement by Company Secretary Nicholas Ecimu.
Gross revenue reduced by 41% to UGX 45.2 billion, driven by a decline in sales volume. This is compared to UGX75.9 billion realized during the same period last year.
“Following the implementation of Tobacco Control Regulations, 2019 (TCR), there was a significant and sustained increase in the incidence of illicit trade in tax-evaded cigarettes, with many of these cigarettes displaying irregular graphic health warnings or no such warnings at all. This resulted in a material reduction in our sales volumes, revenues and profitability,” Ecimu says in the statement.
Profit before tax decreased by 50% to UGX4.9 billion, reflecting the drop in net revenue offset by cost saving measures.
Consequently, BATU posted Profit after tax of UGX3.4 billion compared to UGX6.8 billion for the same period last year.
Excise Duty and Value Added Tax (VAT) decreased by 41% to UGX 23.3 billion due to the lower sales volume. Consequently, net revenue declined by 40% to UGX 21.9 billion.
Why Weekends No Longer Mean Stalled Business - dfcu’s Weekend Agent Float Loan Is Transforming Uganda.Total cost of operations reduced by 37% to UGX 16.9 billion, driven by lower sales volume and cost management initiatives undertaken to cushion business profitability.
Taxes in the form of Excise Duty, VAT and Income Tax reduced by UGX 17.4 billion(41%) to UGX 24.8 billion, in line with lower sales volume and reduced profit.
On the trade in tax evaded cigarettes, the company says: “Trade in tax evaded cigarettes (estimated at 28%) continues to negatively impact industry revenues and deny the Government an estimated UGX 38 billion in much needed revenue annually (source: Trade Monitor Q2 2021).”
BATU also applauded Uganda Revenue Authority for its efforts in addressing the growth of illicit cigarettes in the market.
“We appreciate the Uganda Revenue Authority’s efforts and continue to urge the relevant authorities to enforce the packaging and labelling requirements of the Tobacco Control Act, 2015 (TCA) and TCR, to address the growth of illicit cigarettes in the market.”
