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BAT earnings fall over 9pc in Q1 as inflation squeezes demand

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Despite being efficient in management, British American Tobacco Bangladesh Company (BATBC) experienced a 9.41 per cent year-on-year decline in profit in the first quarter through March this year due to lower revenue.

The company's management efficiency is reflected in the reduction in operating expenses and cost of goods sold.

It lowered the cost of goods sold by 8.39 per cent while operating expenses were slashed by 42 per cent during the quarter this year, compared to the same quarter of the previous year.

The significantly lower operating cost fell short to boost earnings as a 4 per cent year-on-year decrease in quarterly revenue was a big blow to the company.

Lingering high inflation seems to have started making an impact on highly-resistant tobacco demand.

Asif Khan, chairman of EDGE Asset Management, said a significant cut in the sales of cigarette sticks had mainly squeezed the revenue of the BATBC.

"Definitely many consumers have reduced the consumption of this company's sticks while others shifted to products of lower prices as their disposable income shrank," Mr Khan added.

The BATBC witnessed 10 per cent lower sales of sticks in January-March this year, compared to the corresponding period of the previous year.

Moreover, the company endured an 81 per cent year-on-year plunge in export volumes of leaf to Tk 181 million in the first quarter.

In a stock exchange filing on Tuesday, the company said its earnings had fallen owing to volume de-growth and lower leaf export.

The operating cash flow suffered a steep fall in January-March, 2024 from the same quarter of the previous year.

The BATBC has reported NOCFPS (net operating cash flow per share) of Tk 10.49 in the negative for January-March this year, as against Tk 2.09 in the negative reported for the same quarter of the previous year.

In the earnings disclosure, the BATBC said cash flow had worsened due to higher excise and tax payments. Expenses, supplementary duty and VAT paid during the quarter were much higher than the collection from distribution, leaf exports, and other income sources.

The company earlier recommended a 100 per cent cash dividend for 2023 after securing a marginal profit growth in the year.

During the year, the company gained a 12 per cent year-on-year growth in revenue to Tk 403.79 billion.

However, a rise in operating expenses, cost of goods sold, and income tax narrowed the company's year-on-year profit growth to 0.06 per cent only in 2023.

Meanwhile, in line with the regulatory decision, the floor price imposed on the stock of the BATBC was withdrawn on March 4. Since then, the stock plummeted 31.63 per cent to Tk 364.5 per share on the Dhaka Stock Exchange (DSE) until April 25.

It closed at Tk 363.30 per share on Tuesday, with a loss of 2.57 per cent from the day before.

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