British American Tobacco Uganda’s (BATU) net profit declined by 5.3% to UGX 9.76 billion for the year ended December 31, 2025, down from UGX 10.31 billion in 2024, as falling cigarette sales and a sharp rise in illicit trade weighed on performance.
Audited results show profit before tax dropped by 18% to UGX 12.4 billion from UGX 15.1 billion, while gross revenue declined by 18% to UGX 67.0 billion from UGX 82.1 billion, and net revenue fell by 20% to UGX 36.3 billion from UGX 45.4 billion, reflecting significant pressure on sales volumes.
Illicit trade reshapes market
At the center of BATU’s performance decline is the rapid growth of the illicit cigarette trade.
Third-party research cited in the results indicates that illicit cigarettes accounted for 48% of Uganda’s market by December 2025, up from 34% at the beginning of the year, a 14-percentage-point increase.
This means nearly one in every two cigarettes consumed in Uganda is untaxed and illegal.
Illicit products typically evade excise duty and VAT, lack digital tax stamps, and often fail to comply with packaging regulations such as graphic health warnings.
Because taxes make up a substantial portion of cigarette retail prices, these untaxed products are sold at significantly lower prices.
The impact is twofold: legal manufacturers lose market share as price-sensitive consumers shift to cheaper alternatives, while the government is estimated to lose UGX 43 billion annually in excise revenue, complicating fiscal consolidation efforts.
For BATU, which operates fully within the tax and regulatory framework, the pricing disadvantage intensifies when excise rates remain high relative to consumer purchasing power.
Financial performance under pressure
The 20% decline in net revenue suggests a material drop in sales volumes rather than pricing gains.
In highly taxed industries like tobacco, manufacturers have limited flexibility to absorb tax increases without passing costs to consumers, yet price increases risk accelerating the shift to illicit brands.
Despite declining revenues, BATU reported paying UGX 46.4 billion in taxes, up 5% from UGX 44.2 billion in 2024.
The company moved to contain costs, reducing total operating expenses by 21% to UGX 24 billion from UGX 30.3 billion.
However, profit from operations still fell by 17.7% to UGX 12.25 billion from UGX 14.88 billion.
Income tax expense declined by 45.8% to UGX 2.6 billion from UGX 4.8 billion, largely in line with reduced taxable profits.
Overall comprehensive income stood at UGX 9.76 billion, translating into earnings per share of UGX 199, down by 5.2% from UGX 210 in 2024.
Cash flow and balance sheet
Cash generated from operations fell sharply by 78.8% to UGX 5.95 billion from UGX 28.05 billion in 2024.
Despite weaker cash inflows, the company paid substantial dividends, resulting in net cash used in financing activities of UGX 21.9 billion. Consequently, cash and cash equivalents declined by 34.2% to UGX 16.35 billion from UGX 24.84 billion.
Shareholders’ equity fell 29.5% to UGX 28.4 billion from UGX 40.3 billion, reflecting dividend distributions and lower retained earnings.
Total net assets declined 34.1% to UGX 32.5 billion from UGX 49.3 billion previously.
Dividend and outlook
Despite the earnings decline, BATU proposed a final dividend of UGX 199 per share, subject to shareholder approval at the Annual General Meeting scheduled for July 2, 2026.
The dividend will be paid on or about July 31, 2026, to shareholders on record as of July 24, 2026.
The company described Uganda’s macroeconomic environment as stable, citing low inflation, stable interest rates, and continued growth supported by oil investments and agriculture.
However, it reiterated its call for stronger enforcement against illicit cigarette trade, particularly along border areas.
Looking ahead, BATU said it remains committed to building a “Better Tomorrow” by reducing the health impact of its business while sustaining shareholder value.
Nonetheless, with illicit trade now accounting for nearly half the market, the company faces continued pressure on volumes and margins heading into 2026.
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