Companies

BAT Kenya maintains Sh350m interim dividend on profit rise

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THE BRITISH AMERICAN TOBACCO (BAT) KENYA INDUSTRIAL AREA PLANT IN NAIROBI. FILE PHOTO | NMG

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Summary

  • Cigarette maker’s half year net profit increased by Sh19 million to hit Sh2.69 billion as sales volumes grew in the Covid-19 environment.
  • The board has approved an interim dividend of Sh3.50 per share amounting to Sh350 million, being the same as what was paid in preceding similar period. The payout is set for mid-September.

BAT Kenya #ticker:BAT has maintained Sh350 million interim dividend after net profit for the six months to June rose by 0.71 percent, partly slowed by increased operating cost.

Cigarette maker’s half year net profit increased by Sh19 million to hit Sh2.69 billion as sales volumes grew in the Covid-19 environment.

The board has approved an interim dividend of Sh3.50 per share amounting to Sh350 million, being the same as what was paid in preceding similar period. The payout is set for mid-September.

BAT performance came in an environment in which many businesses have been recording revenue drops due to weakened consumer demand especially on non-priority goods and services.

“Despite the challenging operating environment, increased investment behind our brands and support to our trade partners has seen the recovery of domestic volumes. This coupled with easing Covid-19 restrictions resulted in a strong financial performance,” said BAT.

Gross revenue increased by 22 percent to Sh20.25 billion, with the firm attributing this to a recovery in domestic sales volumes, excise duty-led price increases and sustained momentum in exports.

BAT said the growth in domestic sales was partly offset by the five percent rise in excise duty that was effected in October last year and the change in value added tax in January 2021.





The hikes in taxation saw BAT pay Sh7.7 billion as excise duty and VAT, being 26.7 percent higher than the Sh6.08 billion paid in previous similar period.

“This (tax hikes) triggered price increases which generated additional pressures on consumer affordability resulting in downgrading to lower priced brands and a high incidence of illicit trade,” said the firm.

Total costs of operations rose by 27 percent to Sh8.6 billion driven by higher volumes of cigarettes sold and investment in portfolio transformation.

Finance costs, which is linked to servicing of loans, fell to Sh49 million from Sh81 million incurred in the previous similar half year.

BAT is eying new revenue from nicotine pouches in the Kenyan market amid continued resistance from lobbyists who argue that the product, consumed by placing between upper lip and gum, carries the same impact as smoke cigarette.

Parliament last month voted to introduce Sh5,000 tax per kilo of oral nicotine pouches, down from Treasury’s proposal of Sh1,200.

BAT says it continue to engage government for sustainable regulations to support the commercialization of Sh2.5 billion nicotine pouches factory in Nairobi.

“We welcome the government’s pragmatic approach in defining an appropriate excise framework for oral nicotine pouches,” said the firm.