British American Tobacco Uganda, the country’s biggest cigarette importer and distributor, posted a bounce back in its half-year profits following the regularisation of its costs.
The company said its net profits increased to Shs6bn, or Shs126 per share, from Shs3.5bn, or Shs71 per share, from the same period last year. Revenue, on the other hand, dropped slightly, by 1.2%, to Shs73.6bn, according to BATU’s unaudited results.
The rise in profits follows a reduction in the company’s operating costs, which came in at Shs24.4bn compared to Shs27.4bn in the same period last year. This was due to the absence of one-off costs incurred in the first half of 2017 to support compliance with the Tobacco Control Act, 2015, which came into effect in May 2017, according to a statement by the company.
BAT Uganda’s shares closed at Shs30,000 on the Uganda Securities Exchange, unchanged from their year opening price.
Shareholders equity at the end of the period was Shs32.9bn, which is Shs2.6bn higher than last year. Non-current liabilities rose 46.8% to Shs4.9bn, while current liabilities fell 77.3% to Shs11.8bn.
The company’s assets closed at Shs37.8bn versus Shs33.6bn at the same time last year.
“Illicit trade in cigarettes continues to impact our cigarette sales as well as government revenues,” the company said in the results statement.
In January, the company won a reprieve from additional taxes imposed by the Excise Duty (Amendment) Act, 2017. The amendment of the law imposed a higher tax on BAT’s cigarettes, which are imported from Kenya. Previously, the law imposed a uniform excise duty to goods from any of the East African Community Partner States.
The 2017 amendment distinguished between goods that were manufactured in Uganda and those that were imported, As such, the Uganda Revenue Authority reclassified the cigarettes as goods from a foreign country and served notice for payment of additional taxes.
BAT Uganda challenged the law in the East African Court of Justice, which ruled against Uganda. The court said that the amended law’s distinction between locally manufactured goods and imported goods violated sections of the treaty for the establishment of the East African Community, the Customs Union Protocol and the Common Market Protocol.
The excise duty on imported taxes is “up to 36% higher than cigarettes produced locally,” the company’s chairman, Elly Karuhanga, said in its annual report for last year. “The discriminatory and steep excise increase has not only created an unfair playing ground but also threatened our competitive advantage,” he added.