Tobacco farmers’ earnings from leaf supplies to BAT Kenya #ticker:BATretreated by 1.9 percent to Sh1.46 billion even as leaf volumes rose marginally.
The listed tobacco manufacturer said in its half-year 2019 results briefing last week that farmers supplied 8.9 million kilogrammes of leaf in the planting season that ended in May, compared to 8.8 million kilogrammes in 2018.
The slight retreat in earnings this year is in contrast with 2018 when the farmers enjoyed a 28 percent rise in sales to Sh1.49 billion.
The big year-on-year jump in 2018 was due to the fact that production was coming off a depression in 2017 (volumes of 6.9 million kilogrammes and Sh1.16 billion in payments) due to a combination of drought and floods in the leaf growing areas.
BAT has contracted about 5,000 farmers on its books, mainly in Migori, Bungoma, Busia and Meru counties.
The number of farmers has, however, come down in recent years as some turn to other crops, having stood at 5,537 as at May 2015.
The firm did, however, not provide the breakdown of prices per kilogramme in the briefing.
The price of tobacco is determined by leaf grade, with the highest grades fetching above Sh200 and the lowest less than Sh100.
The firm’s shareholders are being paid an interim dividend of Sh3.50 a share for the six-month period, unchanged for the third year in a row, amounting to a total pay-out of Sh350 million.
BAT reported a 25.5 percent rise in net earnings in the period to Sh2.53 billion, buoyed by a 10 percent increase in gross revenue to Sh19.2 billion.
The company attributed the revenue increase to excise-led pricing impact in Kenya and Somalia coupled with growth in cut-rag sales to Sudan.
The company said 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.