Contracted leaf farmers fell to about 4,000 from about 5,000 in prior two years as the UK-controlled multinational sought to “right-size crop” supply in line with consumer demand.
Kenya raised excise duty on cigarettes by 20 percent in 2019 followed by a further 4.94 percent raise last October in line with in line with the average inflation rate for the year ended June 2020.
Tobacco famers under British American Tobacco (BAT) Kenya dropped 20 percent last year, the firm says in latest annual filing to shareholders, citing reduced domestic sale of cigarettes.
Contracted leaf farmers fell to about 4,000 from about 5,000 in prior two years as the UK-controlled multinational sought to “right-size crop” supply in line with consumer demand.
Kenya raised excise duty on cigarettes by 20 percent in 2019 followed by a further 4.94 percent raise last October in line with in line with the average inflation rate for the year ended June 2020.
The increment in taxation is aimed at reducing consumption of cigarettes which has been linked to increased risk of contracting life-threatening diseases such as cancer as well lung and heart diseases which are very expensive to treat.
“As part of efforts to build a sustainable business, we contract tobacco farmers in line with demand for our products,” BAT said in an email response to Business Daily.
“Over the last few years, affordability challenges facing tobacco consumers have heightened, impacting demand for our tobacco products.”
BAT, whose shares are publicly traded on the Nairobi Securities Exchange (NSE), reported domestic sales dropped 24 percent in 2020, cutting gross sales a marginal 2.47 percent to Sh38.85 billion.
Net profit, however, jumped 42.03 percent to Sh5.52 billion largely on the back of increased earnings from exports.
Tobacco yield in 2020 fell a modest 6.74 percent to 8.3 million kilogrammes from about 8.9 million kilos in the previous two years, BAT says in the annual report, the lowest output since about 7.0 million kilos posted in 2017.
Net earnings for leaf farmers – largely concentrated in Migori, Bungoma, Meru and Busia counties – also fell six percent to Sh1.41 billion from Sh1.5 billion in 2019 and 2018.
This means earning per kilo averaged Sh169.88, marginally improved from Sh168.54 in prior two years, and Sh118.71 in 2017.
“One of the challenges we have is that we are having to right-size the crop to match the demand we have on the consumer side,” BAT East Africa managing director Crispin Achola said in an interview on March 18.
“We are constantly reviewing what we are paying for the leaf so that there’s sustainability element to that.”
BAT shareholders on Wednesday approved final dividend payment of Sh4.15 billion, bringing total payout for 2020 to Sh4.50 billion –a 34.33 percent jump over a year earlier.
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