British American Tobacco Bangladesh, the largest cigarette company in Bangladesh has recently posted its annual report for the period 2022. Despite an adverse macroeconomic scenario, the company was able to post growth both in net sales and profit.
Net Revenue (Revenue excluding Supplementary Duty and VAT) increased by 12.6% YoY mainly due to an increase in domestic stick sales and leaf export segment. Domestic stick sales increased by Tk 6,542.1 Mn in 2022.
The increase in sticks is mainly attributed to the growth in quantity consumption by 2,446 Mn. Despite the adverse macroeconomic scenario stick sales in the Premium segment (Benson & Hedges, Alchemy) posted growth showing no signs of price sensitivity.
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However medium segment (Goldleaf, Capstan) was impacted by the price change in the FY 22-23 budget. The volume of John Player Gold Leaf brand decreased by 30% YoY in 2022 as people shifted from the brand due to price increases.
Star and Low segment brands like Royals, Derby, Hollywood, and Pilot posted strong volume growth as a lot of the consumers shifted from the Gold Leaf brand to these brands. Hence, the company was able to post a healthy 3.9% YoY volume growth in the domestic market.
Leaf Export sales increased by Tk 2,863.1 Mn to Tk 5,588.1 Mn in 2022 compared to Tk 2,724.5 Mn in the same period last year. The quantity of leaf export increased from 10.4 Kg in 2021 to 16.6 Kg in 2022.
The company was able to maintain its operations efficiently which allowed the operating profit to grow by 12.2% from Tk 31,704 Mn in 2021 to Tk 35,558 Mn in 2022. However, the main impact of 19.4% net profit growth came from other income segments.
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Non-operating income of the company increased to Tk 1,782 Mn in 2022 from Tk 105 Mn in 2021. The 1,677 Mn increase in other income allowed BAT Bangladesh to post a net profit of Tk 17,872 Mn. If there was no unusual growth in the non-operating income, then the net profit would have posted single-digit growth.
According to BAT Bangladesh’s annual report, other income increased mainly due to getting a partial waiver of IT service costs following an agreement with the vendor. Further details of the service were not mentioned in the annual report.
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Consumption of cigarettes does not decrease with the downturn of macroeconomic activity. It has been clear from BAT’s financials that the premium segment is not price sensitive and continued consumption despite the price increase.
However, the middle segment customers were impacted but they shifted their consumption to cheaper alternatives. Hence, a company like BAT is not expected to be hit by inflationary pressures as it has a portfolio in each segment to cater to the needs of its customers.
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