Uganda: Strong Shilling Affects BAT Profits

Source from:  The Monitor (Kampala) 23 September 2008 09/26/2008

The strengthening local currency against the dollar is eating deep into British America Tobacco Uganda annual returns and is likely to impact on farmer's incentives. The Managing Director BAT Uganda, Mr Ricardo Fonseca, said: "The shillings appreciation has hit hard and as a result the company lost returns worth more than Shs2 billion compared to last year's". In 2007 the Shilling traded at 1,700 a price lower than 1,800 it traded the previous year (2006). This year the shilling has been even stronger against the dollar, where it at one time traded at 1,500, finally stabilising at 1,600/50. Experts predict the shilling is likely to continue pulling a strong stance against the dollar up to the end of the year. Mr Fonseca while briefing the State Minister for Trade Mr Gagawala Wambuzi and officials of the Uganda Export Promotions Board (UEPB), who were on a familiarisation tour of the plant along Port Bell road on September 18, called on the government to help Batu fight illicit trade which has seen an influx of cheap and counterfeit cigarettes. "Illicit trade has had a negative impact on our sales. Last year, we lost over Shs2 billion as a result of illicit trading in the country," Mr Fonseca said. He added for a company directly employing more than 3,000 Ugandans and providing an income to more than 40,000 farmers from the 32 tobacco growing districts of the country, losing sales over illicit trade was discouraging. Currently, Batu contributes a total of Shs36 billion in farmer incomes as per the 2007 records indicating a rise from Shs19 billion spent in 2006, thus representing approximately 50 percent increase in farmer incomes paid across the country. "We promise to continue supporting farmers especially now that we are looking forward to doubling production to 50m kilogrammes," Mr Fonseca said. Enditem