BAT Uganda profits fall 25% as tax bites

British American Tobacco Uganda on Friday reported a 25% decline in net profit for the year ended December 2016, which it blamed on excise-driven price increases and a tough economy that led to a fall in disposable incomes.

Net profit came in at Shs7.8bn compared to Shs10.48bn in 2015, according to audited results released by the company.

“Cumulative excise increases for 2015 and 2016 amounted to 40%,” a note in the financials says. “This increase, coupled with a tough economic environment impacted negatively on consumer disposable incomes.”

Gross revenue fell slightly – by 1.2% – to Shs139.36bn from Shs141bn in 2015. However, excise duty and value added tax increased by 4.1% to Shs73.6bn versus Shs70.7bn in 2015.

The performance is in line with a profit warning issued by the company in its half-year result statement when it said profit for 2016 would “be more than 20% lower than in 2015” following a restructuring exercise.

In 2014, the company announced that it was closing its leaf growing and export business in Uganda to focus on selling cigarettes manufactured by British American Tobacco subsidiaries elsewhere, primarily Kenya. The decision would “have a roll over effect into 2015,” BATU said, “up to the completion of the sale of the 2014 crop in 2015.” Earlier, in 2005, it had closed its cigarette factory in Jinja.

The company’s bottom line is still feeling the effects of the recent restructuring. Total comprehensive income in 2016 fell 61.5% to Shs7.8bn from Shs20.3bn due to the discontinuation of the leaf business and reduced profits from cigarette sales.

Earnings per share declined to Shs159 compared to Shs213 the previous year, a 25.35% fall. BATU’s shares were trading at Shs30,000 on the Uganda Securities Exchange at the close of Friday, unchanged from their opening price this year.

A final dividend of Shs159 per share was recommended by the company’s board of directors. It will be presented for approval at the annual general meeting on 10 May 2017 and paid on 21 June 2017 if approved. The proposed final dividend – totalling to Shs7.8bn – is 100% of the net profit reported.

Shareholders’ equity fell to Shs34.65bn from Shs47.1bn, a decline of 26.4%. Net assets also fell 23.9% to Shs38bn.

BAT Uganda half-year profit falls following major restructuring