BAT Bangladesh suffers operating cash crisis due to higher taxes

Infograph: TBS

British American Tobacco (BAT) Bangladesh, a multinational tobacco products manufacturer in the country, faced a net operating cash crisis in the first half of 2023 due to higher tax payments than its collection from distributors.

As a result, its net operating cash flow per share became negative at Tk1.23, which was positive at Tk16.77 in the January to June period of 2022.

The company said in a disclosure published on the Dhaka Stock Exchange (DSE) that its net operating cash flow decreased due to higher value-added tax (VAT), supplementary duty (SD), health development surcharge and tax payments.

According to its unaudited financial statement, it had paid Tk16,130 crore as SD and VAT and Tk754 crore as income tax in the first half of 2023, which was higher by 14% and 4% respectively than the same time of the previous year.

Its tax payments increased by 13.67% but its fund collection from distributors, leaf exports and other sources, increased by 7.78% in the first half of the current year than the same time in 2022.

At the end of the first half of 2023, its net operating cash flow became negative by Tk66.52 crore.

In the national budget for 2023-24 FY, prices for 10 sticks of medium-tier and high-tier cigarettes increased by 3.08% to Tk67 and 1.80% to Tk113 respectively.

In the premium tier, the price for 10 sticks of cigarettes was set to Tk150, a 5.63% increase.

Additionally, the turnover tax applied to the tobacco industry was raised from 1% to 3%.

Despite facing financial challenges, BAT Bangladesh has recorded year-on-year revenue growth in both the domestic and export markets during the first half of 2023.

According to its statements, its net revenue increased by 19% and net profit by 3.91% in the January-June period of 2023 to Tk4,920 crore and Tk949.76 crore respectively.

Its domestic revenue witnessed a year-on-year increase of 15.89% to Tk4,720 crore in the first half of 2023. On the other hand, its tobacco leaf exports increased by 236% to Tk199.62 crore in the first half of 2023, which was Tk59.33 crore in the first half of 2022.

In the first half of 2023, the earnings per share (EPS) of the company stood at Tk17.59, up from Tk16.93 in the same period of 2022.

On the other hand, BAT Bangladesh has reported a decline in its net profit during the April to June quarter of 2023 despite an increase in net revenue, according to its statements.

In the second quarter (April-June) of 2023, its net revenue witnessed a year-on-year increase by 21% to Tk2,651 crore, and net profit declined by 0.70% to Tk493.51 crore.

British American Tobacco Bangladesh has been publicly listed on the Dhaka Stock Exchange (DSE) since 1977.

It manufactures tobacco products and markets brands such as Benson & Hedges, John Player Gold Leaf, Capstan, Star, Royals, Derby, Pilot, Hollywood, and Lucky Strike.

It has cigarette factories in Dhaka and Savar, a green leaf threshing plant in Kushtia, and a green leaf re-drying plant in Manikganj.

In 2022, the company made an annual profit of Tk1,787 crore and paid a 200% cash dividend to its shareholders.