British American Tobacco Bangladesh faced a difficult Q3’23 as the net revenue of the company declined by 7.6% YoY due to lower consumption and higher supplementary duty and VAT. The market leader in the cigarette industry posted net revenue (excluding supplementary duty and VAT) of Tk 18,722.8 million in Q3’23 which was Tk 20,270.6 million in the same period last year.
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Supplementary duty and VAT increased by 5.8% YoY compared to the 2.4% YoY growth in Gross revenue. Hence it led to the decline in net revenue. Moreover, the company took a hit in the consumption of the local market. In Q3’23, sticks sold in the domestic market declined by 0.2% YoY to 13,183.5 million sticks in Q3’23.
Inflation along with the increase in the price of cigarettes in FY 23-24 impacted the local consumption in this quarter. In the budget of FY 2023-24, the government increased supplementary duty in low segments from 57% to 58% and increased the prices of cigarettes in all four segments.
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Usually, the consumption of cigarettes is inelastic in nature and showed growth even after an increase in prices in the preceding years. However high inflation might have impacted BAT Bangladesh’s business in this quarter.
Source: EBL Securities
Gross profit of the company in Q3’23 declined by 11.9% YoY to Tk 9,398.2 million.
Despite the double-digit growth in gross profit efficient operations management helped BAT Bangladesh to contain the decline of profit to only 1.1% YoY. The management of the company was able to decrease its operating expenses by 38.3% YoY to Tk 1,595.1 million in Q3’23.
A decline in tax liabilities also helped the company to reduce the rate of decline compared to its gross profit decline. The company had incurred Tk 223.8 million lower tax liabilities compared to the same period last year. BAT Bangladesh posted a profit of Tk 4,059.2 million in Q3’23.
Modest profit growth in terms of 9M’23
In terms of YTD 2023, BAT Bangladesh posted 10.3% YoY net revenue growth. The growth mainly came in the first 6 months of 2023 where the company posted net revenue growth of 19.0% YoY growth.
Domestic sales contributed to 95.6% of the total revenue and the rest has been contributed through leaf export. The company didn’t export any finished products (sticks) in the first 9 months of 2023. Overall domestic sales increased by 10.0% YoY from Tk 59,026.1 million in Q3’22 to Tk 64,935.6 million.
Sticks sold in the domestic market grew by 7.6% to 52,291.5 million. Leaf export also increased by 16.3% YoY to Tk 2,990.5 million in Q3’23.
Despite the decline in profit growth in Q3’23, BAT Bangladesh posted a profit of Tk 13,556.8 million in the first nine months of 2023. Profit increased by 2.4% compared to the same period last year.
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