BAT Kenya’s #ticker:BAT net profit for the half-year ended June 2019 rose by a quarter backed by higher revenue as a result of excise tax changes in Kenya and Sudan tobacco sales.
The cigarette manufacturer’s net profit for the period stood at Sh2.53 billion, compared to Sh2.07 billion in the same period last year as gross revenue rose by 10 percent to Sh19.2 billion.
“The increase in gross revenue was driven by excise-led pricing impacts in Kenya and Somalia coupled with growth in cut rag sales to Sudan,” said BAT Kenya in a statement yesterday.
“The profit increase reflected the impact of the higher operating margin and lower finance costs due to lower borrowing as a result of further improvements in working capital management.” The company said though that it saw lower sales volumes in Kenya and the Democratic Republic of Congo as price increases of its products made them less affordable for users, and also due to high incidence of illicit cigarette sales in Kenya. The tax evasion on tobacco products, BAT said cost the government an estimated Sh2.5 billion per year in revenue.
Affordability is also likely to persist as a problem due to an increase in cigarette excise duty this year.
The tax went up by 5.15 percent this month due to the annual inflation adjustment, and is expected to go up again by 15 percent should proposals in the Treasury’s Finance Bill 2019 be passed.
On the cost side, BAT spent less in finance costs, which fell to Sh125 million from Sh164 million last year, while excise duty, VAT and income tax costs rose by Sh503 million to Sh9.3 billion. The firm retained its interim dividend at Sh3.50 per share.