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British American Tobacco Kenya plc Thursday posted gross revenues of KSh 39.8 billion, after-tax profit of KSh 3.9 billion and a contribution to Government revenue of KSh 18 billion.
The Company made the announcement during its full-year results for the year ended 31 December 2019; it recommended a final dividend of KSh 30.00 per share for their shareholders, payable net of Withholding Tax to shareholders on the register on at the close of business on 20 March 2020. The total dividend for 2019 will be KSh 33.50 per share.
BAT Kenya Managing Director, Beverley Spencer-Obatoyinbo said that BAT Kenya’s business continues to show resilience and deliver sustained shareholder value, despite the difficult operating environment in Kenya and in many of their export markets.
“Gross revenue increased by 9.1%, driven by excise-led pricing on cigarettes in Kenya, increased cut rag (semi-processed tobacco) sales into Sudan and the introduction of new category revenue in Kenya following the launch of BAT’s new oral nicotine pouch, which does not contain tobacco. Profit before tax reduced despite the revenue growth, primarily due to the anticipated impact of the solatium compensation contribution and a 20% increase in excise duty rates during 2019,”.
“The launch of BAT’s oral nicotine product category was a major milestone for the Business in 2019 and a significant first step on our journey towards transforming the tobacco industry. Given the high incidence of oral stimulant use amongst smokers, we believe that this new product category will provide a viable alternative to smoking.
BAT is looking to invest KSh 2.5 billion in building a factory in Africa for the manufacturing oral nicotine pouch. The factory seeks to serve as a major export hub for Africa and beyond.
“Despite this encouraging performance and the introduction of a new product category, our Business revenues will continue to be driven by our cigarette business for the foreseeable future. We therefore cannot afford to underestimate the threat of illicit trade and its impact on the legitimate cigarette market.
“Excise increases continue to adversely impact consumer affordability, leading to a higher incidence of illicit trade at the expense of the legitimate industry and tobacco-related government revenues. As at November 2019, our data suggest that a decline in the incidence of illicit trade originating from Kenya has been almost entirely offset by a significant increase in the volume of illicit cigarettes coming across the Ugandan border, which by our estimate now accounts for more than 90% of all tax-evaded cigarettes sold in Kenya. These are predominantly cigarettes comprised of non-Kenyan tobacco leaf and are therefore adversely impacting Kenyan tobacco farmers.
“Affordability challenges for tobacco consumers were intensified following the 20% increase in excise duty on tobacco products towards the end of 2019. We are extremely concerned that this latest excise shock will lead to a major increase in the incidence of tax-evaded cigarettes unless the Kenyan and Ugandan governments work together and take decisive action to tackle the problem at source. We therefore continue to urge the responsible government agencies to redouble their efforts towards combating illicit trade in cigarettes and put in place the necessary border control, manufacturing and supply chain measures to protect the consumer and recover the estimated KSh 2.5 billion of Government revenues lost to smuggled tax-evaded cigarettes.”
According to BAT Kenya Chairman, George Maina said: “I am extremely pleased by the business’ resilient performance, which is reflected in the recommendation by the Board of Directors of a final dividend of KSh 30.00 for 2019. The total dividend for 2019 will be KSh 33.50 per share.
“As we continue into 2020 and beyond, BAT Kenya remains committed to leading the transformation of the tobacco industry and building a sustainable business that contributes to manufacturing and economic growth.
“I am confident that with our sustained investment, the exceptional quality of talent within the Company, and our partnerships with over 80,000 business partners and 5,000 tobacco farmers we have the right strategy in place to deliver continued value to our shareholders and other stakeholders in the years ahead.”