Companies

BAT profit grows marginally as counterfeits hurt sales

DnKRARaid1809

Cigarette maker British American Tobacco (BAT) Kenya has said the proliferation of counterfeit tobacco products and differences in tax regimes in its export markets are increasingly hurting its earnings.

BAT Kenya marginally grew its profit after tax by six per cent to Sh3.27 billion for the fiscal year ended December 2012 compared to Sh3.1 billion recorded a year earlier.

The firm’s sales grew to Sh30.5 billion last year compared to Sh28.82 billion in 2011 due to increased exports of semi-processed tobacco to its regional markets.

“We continue to engage the government and other relevant stakeholders to address issues on illicit trade in cigarettes,” BAT said in a statement.
“There is need to level playing field in the industry for local manufacturers and in having an optimal excise regime in order to generate sustainable industry and government revenues.” BAT exports its products to more than 15 regional markets which account for more than half of its revenues.

It exports cigarettes to Uganda, Rwanda, Tanzania, Madagascar, Mauritius and countries in the Horn of Africa.

Each of these export destinations has a different tax regime on duties and levies charged on cigarette products.

BAT also sells its semi-processed tobacco referred to as ‘cut rag’ to the Egyptian market which recorded a drop in volumes owing to the civilian strife and instability in the North African country.

BAT estimates that illicit cigarettes in the Kenyan market cost the economy about Sh1.57 billion and has urged the Anti-Counterfeit Agency to step up surveillance.

The company is banking on the Sh1.2 billion upgrade in its Nairobi factory to increase production capacity and efficiencies so as to serve export markets fully.

“Profits were also positively affected by the underlying benefits of productivity savings on the cost of manufacture,” it said.

Shareholders of the blue-chip firm will earn a total dividend of Sh32.50 per share after the company declared a final dividend of Sh29 in addition to an interim dividend of Sh3.50 per share.

The tobacco products counter was one of the star performers at the Nairobi Securities Exchange (NSE) last year, rallying 100.41 per cent to close at Sh493 at the end of 2012.

BAT Kenya’s shares closed trading Friday at Sh539 and remains NSE’s most pricey stock.