BAT Kenya profit rises 2% to Ksh.4.4 Billion amid illicit trade pressure

The tobacco manufacturer reported profit before tax of Ksh.4.4 billion, up from Ksh.4.3 billion recorded in the corresponding period last year. Net revenue rose by 5 per cent to Ksh.12.3 billion, supported by a recovery in export sales and continued growth in oral nicotine pouch sales following the product's launch in June 2025.

The improved revenue performance helped cushion the impact of declining domestic cigarette sales as consumers grappled with inflationary pressures and reduced disposable incomes.

However, total operating costs increased by 7 per cent to Ksh.8.0 billion, driven by higher input costs, additional compliance expenses related to graphic health warning regulations and investments in the company's expanding multi-category product portfolio.

As a result, operating profit grew marginally by 1 per cent to KSh4.3 billion, with productivity gains and operational efficiencies helping offset the higher costs.

Commenting on the results, BAT Kenya Managing Director Sidney Wafula said the company had remained resilient despite operating in an increasingly challenging business environment.

"Despite a challenging operating environment marked by the continued rise in illicit cigarette trade, the company delivered resilient performance during this period. These results reflect the agility of our business in navigating an increasingly complex and dynamic environment," said Wafula.

He said illicit cigarette consumption, estimated at 45 per cent of the domestic market by the end of 2025 based on third-party research, remains the biggest threat to the sustainability of the legitimate tobacco industry.

According to the company, the illicit trade deprives the government of an estimated Ksh.12 billion in tax revenue annually while undermining legitimate businesses and associated value chains.

Wafula also attributed softer domestic cigarette sales to reduced consumer purchasing power, worsened by elevated fuel prices linked to the ongoing conflict in the Middle East.

He noted that modern oral nicotine pouches continue to make an increasing contribution to revenue, while export markets also faced macroeconomic challenges and adverse weather conditions, although currency stability in key markets helped cushion the impact.

Despite the challenging environment, the company's board approved an interim dividend of Ksh.10.00 per share for the financial year ending December 31, 2026, reaffirming its commitment to delivering shareholder returns.

Looking ahead, BAT Kenya said it will continue advancing its strategy of expanding smoke-free products through science-based innovation while advocating for evidence-based regulation to support tobacco harm reduction.

The company also called for stronger and more coordinated government action to curb the proliferation of illicit cigarettes, saying sustained enforcement is critical to protecting public revenue, legitimate businesses and long-term economic growth.