July 20, 2023
BAT Kenya Ltd, the only listed cigarette maker in Kenya, reported a 3.5% decline in net profit for the half-year period ending on June 30, dropping from Ksh 2.9 billion to Ksh 2.8 billion. Additionally, their pretax profit decreased by 4%, falling from Ksh 4.2 billion to 4 billion, and net revenue saw a significant drop of almost 7%. The company attributes this dip in financial performance to various factors, including the new excise duty rate and challenging macroeconomic conditions. They also point to a harsh global business environment, inflationary pressures leading to higher raw material costs, and geopolitical tensions in key export destinations.
The increase in excise duty, from 6% effective October 2022 to 10% effective July 1st, 2023, has directly impacted the company’s sales figures, contributing to the overall decline in revenue.
Furthermore, the firm acknowledges that the illicit cigarette black market in Kenya continues to have a negative impact on their revenues, resulting in significant tax revenue losses for the state, estimated at over KSh 6.5 billion annually. An investigation conducted by Kenyawallstreet revealed the sale of cheaper BAT branded cigarettes in Kenya, originating from neighboring Tanzania, adding to the challenges faced by the company.
In light of these difficulties, BAT Kenya Limited emphasizes the importance of increased efforts by the Kenyan Government to combat the illicit trade, including enhancing collaboration among multiple stakeholders and cross-border cooperation to enforce anti-illicit trade regulations effectively.
Despite these short-term macroeconomic challenges, BAT Kenya remains optimistic about overcoming them and delivering sustainable value to its shareholders. While the company reported a 4% decrease in revenue, amounting to KSh 21 billion, the cash generated from operations increased by 5% to KSh 3.9 billion.
To benefit its shareholders, the BAT Kenya Board of Directors approved an interim dividend of KSh 5.00 per share for the year ended on December 31st, 2023. Shareholders registered as of August 18th, 2023, will receive the interim dividend on or around September 22nd, 2023.
photo source: google
Delino Gayweh
Serrari Financial Analyst
