BAT full year profit thins to Ksh.3.9 billion on higher costs

Tobacco manufacturer British American Tobacco (BAT) Kenya has announced a Ksh.3.9 billion full year profit for 2019  representing a 4.9 per cent dip in earnings over the period.

The slight down shift in the performance is attributable largely to higher regulatory costs after the introduction of a solatium contributory levy during the year.

Nevertheless, the firm’s gross revenues grew by 9.1 percent to KSh.39.8 billion driven in part by excise-led pricing on cigarettes in Kenya and higher sales volume for unprocessed tobacco in Sudan.

Net revenues further remained in line with the gross income at KSh.24 billion from KSh.20.8 billion as the manufacturer incurred lesser excise duties and Value Added Tax (VAT) charges from decreasing sales volume in Kenya.

BAT costs grew to KSh.18.3 billion in the period from KSh.14.5 billion even as income tax expenses reduced by 11.1 per cent to KSh.1.6 billion as the firm’s total contributions to government revenues shed off 1.4 percentage points to settle at KSh.18 billion.

During the year, the Supreme Court upheld new tobacco regulations to see the introduction of a compensation fund to finance tobacco control research and tobacco cessation and rehabilitation programs, a charge priced at two percent of the value of manufactured and imported products.

Moreover, tobacco manufacturers incurred a further excise duty raise under amendments to the 2019, Finance Act with the adjustments being priced in at 20 per cent.

The company’s financing costs however provided some breather to higher regulatory costs as BAT’s underlying profitability reduced the firm’s reliance on overdraft services by 43 percent to KSh.193 million.

Further, net cash from operating activities increased by45 percent to KSh.7.7 billion with a significant haul of the pool being used to set up a nicotine free manufacturing hub in Nairobi.

BAT’s board has termed the results as solid given the continued stay of a challenging regulatory environment in the country.

The board has further proposed a KSh.30 dividend per share bringing the total expected shareholder pay out to KSh.33.50 from KSh.35 last year when added to the already paid up interim dividend.