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British American Tobacco (BAT) has decided to expand capacity further for catering to the rising demand for tobacco leaves in export destinations, with Tk 1.51 billion to be spent on a bonded warehouse and ancillary facilities.
Tobacco leaf exports have jumped significantly in recent times on the back of growing demand, said a senior executive of BAT Bangladesh, wishing not to be named, adding that BAT's revenue from leaf exports would go higher in the future.
Of the total investment plan, Tk 1.03 billion will be spent on building a bonded warehouse for the storage of wrapping materials, leaves and finished goods.
A bonded warehouse is a licensed facility that allows eligible exporters to store imported goods and inputs without paying import duties and taxes.
Another Tk 245 million will go to ensure utilities such as electrical, fire detection and protection system, air conditioning and ventilation system, IT and security system.
Moreover, ancillary facilities for employees' wellbeing, such as mosque, canteen, and training centre, and for business operations, such as waste management yard, fire station, and equipment storage will be set up at the cost of Tk 214 million.
The remaining Tk 19 million will be used for reinforcing a cement concrete road and installing an underground drainage system.
The investment will be financed from internal sources and bank borrowing, according to a stock market filing on Sunday.
How much of the amount will come from own sources and how much from bank loans are yet to be decided.
The company has not provided any forecast either on the production boost and the revenue increase due to the new investment.
BAT Bangladesh's leaf exports more than doubled year-on-year to Tk 2 billion in the first six months through June this year. During the period, domestic cigarette sales also grew 16 per cent to Tk 47.20 billion.
In 2022, BAT Bangladesh exported leaves worth Tk 5.58 billion.
From Bangladesh, Tobacco green leaf is exported to Belgium, Spain, Belarus, Lithuania, Georgia, the Netherlands, Turkey, the United Arab Emirates, Dominican Republic, Jordan, Italy, Poland, Germany, the United Kingdom, United States, Chile, Pakistan, Indonesia, Korea, Kenya and South Africa.
Over the past 30 months, BAT Bangladesh has invested about Tk 12 billion in four phases to enhance production capacity.
It has secured a steady business growth for the past three years, even amid economic adversities, riding on the increased demand for cigarettes.
Factors, such as high inflation and product price increases could not change the buying habit of tobacco consumers and that helped BAT's business keep growing, according to market analysts.
BAT Bangladesh markets various brands namely Benson & Hedges, John Player Gold Leaf, Capstan, Star, Royals, Lucky Strike, Derby, Pilot, Flag and Hollywood.
The cigarette maker has factories located in Dhaka and Savar, a green leaf threshing plant in Kushtia, and a green leaf re-drying plant in Manikganj.
The company's half yearly profit rose 4 per cent year on year to Tk 9.50 billion while gross revenue went up 14 per cent to Tk 212.30 billion, driven by higher domestic sales and higher tobacco leaf exports.
BAT Bangladesh's annual profit also grew more than 19 per cent year on year to Tk 17.87 billion in 2022, which led to disbursement of 200 per cent cash dividend to shareholders for 2022. The return on BAT stock investment was, however, higher for 2021 -- at 275 per cent.
Despite the business growth, the company's share has been languishing at the floor price of Tk 518.70 on the Dhaka Stock Exchange since September last year.
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