Drought cuts BAT pay to farmers by 12pc

British American Tobacco (BAT) #ticker:BAT payments to farmers dropped by 12 per cent (or Sh100 million) to Sh1.2 billion in the 2017 season as leaf deliveries were lower than in 2016 due to drought and floods, the company has said.

The multinational, which has contracted about 5,000 tobacco farmers mainly in the Migori region, last week said that leaf volume fell to 6.9 million tonnes last year compared to the 7.5 million tonnes delivered in 2016.

Farmer payments stood at Sh1.3 billion in 2016 and Sh1.25 billion in 2015.

“The tobacco crop yield decreased in 2017 due to adverse weather conditions including floods and persistent drought which to date are still being felt in parts of the country.

“The harsh weather conditions impacted the quality and quantity of the tobacco crop harvested, thus ultimately impacting farmer earnings,” said BAT Kenya head of legal and external affairs Simukai Munjanganja (right).

“As part of our sustainability agenda, we facilitate crop insurance for our contracted farmers. In 2017, 2210 contracted farmers in Western, Nyanza and Eastern Kenya whose crop was affected by harsh weather received Sh79.5 million in compensation for crop losses.”

Insurance firm UAP Old Mutual made payments to the affected farmers whose yields had fallen below the historical average. The tobacco growing season normally ends in May. Some farmers have also abandoned the crop, citing lower leaf prices in an industry that has seen regulatory controls tightened in recent years, on top of tax increases.

Other than farmers, BAT shareholders are also looking at a reduced dividend payout for 2017 after the firm’s earnings fell amid higher excise taxes and a downcast business environment due to the prolonged presidential election period.

The Nairobi Securities Exchange listed company made a net profit of Sh3.3 billion in the period compared with Sh4.2 billion a year earlier as gross revenue declined six per cent to Sh34.4 billion.

BAT will pay out a total dividend of Sh26 per share, compared to the Sh43 paid out in 2016.

The firm also retained some of its earnings last year after a period of paying out its entire net profit to shareholders in dividend.

The Sh26 payout represents 78 per cent of the firm’s earnings per share, which stood at Sh33.36.