British American Tobacco Bangladesh | A Year End Performance Review of 20203 min read

British American Tobacco Bangladesh (BATBC) has recently published its annual report. The largest tobacco company in Bangladesh posted a resilient performance in 2020 amid the coronavirus pandemic. Net Revenue of the company has grown by 6.1% driven by 3.5% growth in Domestic Sticks Sales & 353.3% growth in Export Sticks Sales. According to the annual report of 2020, the company has sold 52,543 Mn sticks in Bangladesh which was 50,774 Mn sticks in 2019. Its newly started sticks export business also showing promise by selling 312.8 Mn in 2020 sticks which were 69 Mn in 2019.

Another major contributor to the growth in revenue was the sharp decline in illicit trade volumes. The illicit trade volume for the year 2020 was below 8% of the total volume in the market. Illicit cigarette sales did not grow mainly due to supply chain disruption due to pandemic and the continued effort against illicit trade from the Government agencies. The company still sees potential for growth in the domestic market if the illicit volumes can be reduced further.

Read more: BATBC shares fall over NBR’s 2013 tax claim.

The company also marked a great year in terms of profitability by growing 17.7% YoY. In 2020, Profit after Tax was Tk 10,887 Mn which was 9,246 Mn in 2019. The growth in profitability was achieved due to the operational efficiency of the company & higher sales.

Brand wise Performance

[ Brands of BAT: Benson & Hedges, John Player Gold Leaf, Capstan, Star, Royals, Derby, Pilot, and Hollywood.]

1. Benson & Hedges: Sales of the flagship brand declined by 20% YoY in the first six months of 2020 due to the increase in price post-2019 budget. However, the brand rebounded in the next six months by growing 1% YoY.
2. John Player Gold Leaf: The brand grew by 5% YoY on the back of launching new variants of John Player Gold Leaf in Q1’20.
3. Star: The brand has shown significant growth of 66% YoY due to the acceleration of down-trading to the lower segment post-2019 budget.

An embodiment of consistent growth

British American Tobacco has maintained its growth momentum this year. The company has grown its net revenue at a rate of 8.6% CAGR in the last 5 years. The net revenue of the company in 2020 was Tk 60,290.6 Mn which was Tk 43753.8 Mn in 2016. Given the entrance of new competitors like Japan Tobacco International in Bangladesh, the net revenue growth of BAT is nothing less than remarkable. The company has also recently focused on exporting finished goods which have seen good growth this year.

Expanding into Export Market

On 18^th February 2021, it has been reported that British American Tobacco is investing Tk 1,925 Mn to expand the manufacturing capacity in its Savar factory to increase growth further in the export market. From 2019 the company has started exporting finished goods (sticks) along with its existing leaf export business.

Future Ahead

Although the company has grown remarkably despite new competition it seems likely that the next growth opportunity of the company lies in export. The company has started exporting cigarettes in 2019 along with its existing leaf export business.

As per Grand View Research, the global tobacco market size was about $ 932.1 bn and it is expected to grow at a compound annual growth rate (CAGR) of 1.8% within 2021-2028. The recent investment & growth in export sticks show the focus of management in the future. Moreover, the company didn’t need to pay supplementary duty & VAT for its export sticks business. Hence sticks export means a higher margin for the company. The segment which contributed 0.5% to the total net revenue looks to be the main driver of growth in the future.

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Reference Link

• • BATBC Annual Reports
  • https://www.grandviewresearch.com/industry-analysis/tobacco-market