BAT pays out entire net earnings of Sh3.7bn as dividend after profit jump

Cigarette maker BAT Kenya’s shareholders are set to pocket the company’s entire 2013 net earnings of Sh3.7 billion as dividends, marking a new payout record for the NSE-listed firm.

The manufacturer announced a Sh37 per share dividend payment, which translates to a payout of Sh3.7 billion going by the company’s total issued shares of 100 million.

The blue-chip’s payout is in tandem with its policy of generous dividend payment to shareholders, a trend that has made the stock as one of the most sought after at the Nairobi bourse.

“BAT is a mature stock and it is therefore a favourite with investors who view it as an income stock as opposed to a growth stock,” said Johnson Nderi, the ABC Capital advisory and corporate finance manager.

British American Tobacco (BAT) Kenya’s net profit for 2013 jumped 13.7 per cent to Sh3.72 billion.

“The final dividend when added to the interim dividend (Sh33.50) already paid gives a total dividend of Sh37 per share,” the company said in a statement when releasing its full year results on Friday.

BAT, the country biggest processor and exporter of tobacco, shrugged off depressed exports of semi-processes tobacco to post marginal one per cent increase in net revenue to Sh19.6 billion.

Political unrest in Egypt, where tobacco accounts for 10 per cent of Kenya’s exports, ate into the company’s earnings given that the northern African imports majority of BAT’s semi-processed tobacco.

Data from Kenya Association of Manufacturers (KAM) shows that sales of cut tobacco to Egypt dropped by Sh1.9 billion between January and August this year compared to the first eight months of last year.

At the same time, earnings from tobacco and related product exports dropped 87 per cent to Sh419 million from Sh2.3 billion in eight months to August. 

BAT exports its products to more than 15 markets which in 2012 accounted for 61 per cent of its revenues, with the domestic market took up the remainder. It exports cigarettes to Uganda, Rwanda, Tanzania, Madagascar, Mauritius and countries in the Horn of Africa.

“The improvement in gross turnover was partially offset by lower rag (semi-processed tobacco) export volumes during the year reflecting lower demand level,” the company noted, adding that it benefited from foreign exchange earnings from the exports.

Mr Nderi noted that tobacco products remain a precious commodity in the country, saying this has ensured that exports to Egypt still take place despite the turmoil that is now in its third year.

Continued growth in sales of the Kenyan market indicates that the firm has defied effects of the Tobacco Control Act 2007, which controls smoking in public places and banned tobacco advertisements.

The tobacco industry, much like other players in the ‘sin industry’, have had to make do with and unpredictable tax regime as it is one of government’s main targets to raise its revenue.

In the year to December 2013, BAT saw its excise and VAT payment increase by 11 per cent to Sh12.2 billion when its gross turnover increased by five per cent to Sh31.9 billion.

“Net revenue increased slightly by one per cent reflecting the improvement in gross turnover offset by higher excise duty and VAT,” BAT said.

The cigarette maker’s share price closed the week at Sh578 on Friday, with no trading on the counter.