BATU profit drops as Tobacco law bites

Kampala.

British American Tobacco Uganda (BAT Uganda) has registered a 52 per cent decline in its half year performance, posting a profit after tax of Shs3.5 billion, down from Shs7.3 billion recorded in 2016.
According to unaudited half year results for the six months ended June 30, 2017 announced by the company directors, the decline in profit was attributed to costs incurred in the Tobacco Control Act.

The company’s gross revenue increased by 2 per cent, driven by excise led price increases taken in the second half of 2016.

“Operating profit was lower at Shs5.3 billion before tax, reflecting the impact of one-off costs incurred in the first half of 2017 to support compliance with the Tobacco Control Act, 2015 which came into force on 18 May 2017,” the statement read in part.

The finance costs decreased by 64 per cent due to lower foreign exchange losses during the period, profit before tax was Shs5 billion, reflecting the impact of higher revenues off-set by the costs incurred during the period.
The results also showed that the contribution to government revenues in the form of Excise Duty and VAT increased by Shs3 billion to Shs42 billion, driven by higher excise rates compared to the previous period.

Regulation
The directors said they are awaiting the outcome of a legal challenge against the Tobacco Control Act, 2015.
“Our challenge does not reflect an opposition to the regulation of our industry, which we support. We agree that tobacco should be appropriately regulated. As such, we do not oppose sound, evidence-based regulation that has gone through a formal consultation process and delivers its policy aims,” they said.

Mr Dadson Mwaura, the managing director BAT Uganda, speaking to media during the annual general meeting recently, said the regulations under the Tobacco Control Act 2015 should be fair, balanced, evidence based, enforceable and deliver its intended public health objectives.

“We have a proud track record of complying with all laws and regulations. However, we are concerned that certain provisions of the Tobacco Control Act 2015 are disproportionate, oppressive, contrary to the Uganda Constitution and impractical in terms of effective enforcement which is why we have petitioned against them in the constitutional court,” he said.

The directors said regulation that fails to meet this criterion is likely to lead to negative unintended consequences such as stimulating illicit trade which impacts negatively on the sustainability of government and industry revenues.

“This will remain a key focus area for our engagement with relevant authorities as we continue to advocate for a reasonable and enforceable law,” the statement said.