British American Tobacco (BAT) Plc, a listed tobacco manufacturer, has posted an 18.8% decline in its net profit for the full year 2023 to KSh 5.6 Billion from KSh 6.9 Billion in 2022.
- •According to the BAT Kenya Audited results for the year ended 31st December 2023, the tobacco manufacturer posted a 2% decline in gross sales to KSh 41.2 billion.
- •The cost of operations for the multinational grew by 1% to KSh 17.6 billion while the firm’s pre-tax profit dropped 19% to KSh 8.0 billion.
- •Shareholders’ funds, an amount that owners of the firm will get as compensation were the business to be liquidated, declined to KSh 16.3 billion in 2023 from KSh 16.4 billion in 2022.
BAT Kenya’s revenue also declined to KSh 25.6 billion in 2023 from KSh 27.4 billion in 2022. Earnings per Share for BAT, an indication of a listed firm’s profitability declined to KSh 55.68 in 2023 from KSh 68.92 in 2022.
A statement from BAT Kenya Plc Board of Directors lists Geopolitical disruptions, cost of living pressures, currency devaluation, rising interest rates, and tax increases as factors that severely impacted the company’s tobacco business.
In the domestic market, business performance was negatively impacted by consumer affordability challenges which triggered downgrading to lower-priced brands and fuelled an increase in the prevalence of illicit trade in tax-evaded cigarettes, estimated at 27% of all cigarettes consumed in Kenya.
Regulatory Uncertainty
BAT Kenya said shrinkage of the legitimate cigarette market due to illicit trade continues to adversely impact industry revenues and deny the Government an estimated KSh 7 billion per annum in taxes. Regulatory uncertainty relating to BAT Kenya’s modern oral category resulted in supply disruption of its tobacco-free oral nicotine pouches to the market.
It also impeded the ability of BAT Kenya to commercialize its oral nicotine pouch factory in Nairobi, which would otherwise, unlock manufacture for both domestic and export markets.
- •Gross revenue was 2% lower at KSh 41.2 billion, primarily driven by lower domestic and cut-rag (semi-processed leaf) sales, offset by pricing and foreign exchange benefits from the firm’s export sales.
- •Cost of operations increased by 1% to KSh 17.6 billion due to higher input costs offset by cost savings from productivity initiatives, as well as lower sales volume.
- •Profit before tax was 19% lower at KSh 8.0 billion primarily attributable to reduced revenue due to lower sales, higher taxes and higher duties on inputs.
Taxes in the form of Excise Duty, VAT, Customs Duties, Solatium Levy, Tax Stamps, Pay As You Earn (PAYE) and Corporation Tax increased by 5% to KSh 19.4 billion.
The Board of Directors has proposed a final dividend in respect of the year ended 31 December 2023 of KSh 45.00 per share, to be recommended for approval by shareholders at the Annual General Meeting to be held on 26 June 2024. The final dividend, when added to the interim dividend already paid, gives a total dividend of KSh 50.00 per share.
The dividend, which is subject to withholding tax, will be paid on or about 26 June 2024 to the shareholders on the register at the close of business on 24 May 2024.
The current share price of BAT Kenya is KSh 419.50. BAT closed its trading at the NSE on Wednesday, February 14, 2024, at KSh 423.00, a 0.5% drop from its previous closing price of KSh 425.00.
The BAT Kenya counter began 2024 with a share price of KSh 407.50 and has since gained 3.8% on that price valuation, ranking it 22nd on the NSE in terms of year-to-date performance.
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