BAT records Kes2B in half-year profits

British American Tobacco (BAT) Friday announced after tax profit growth of of Kes2Billion,a rise of 3.4 percent for the first half of 2018. The  firm’s gross revenue rose by 1.9% to Kes17.5 billion, driven by growth in export volumes and revenues.

“I am pleased to report that BAT Kenya has built good strategic momentum in a challenging environment in Kenya and across its export markets to deliver a solid set of results in the first half of the year. “During the first half of 2018, profit after tax increased by 3.4% to KSh. 2.0 billion while gross revenue increased by 1.9% to KSh. 17.5 billion. This was driven by growth in export volumes and revenues and follows a particularly difficult 2017,” said BAT Kenya Managing Director, Beverley Spencer-Obatoyinbo.

“The legitimate domestic market declined as impacts on consumer disposable incomes and the effects the illegal market for cigarettes continues to be felt, as evidenced by a decline in the Company’s contribution to Government revenues, which fell by KSh 336 million. The stretch on consumer budgets initially caused by the 50% excise spike in December 2015 has been compounded by rising inflationary pressures.

“We are encouraged by government’s proposal for an amendment in the inflationary adjustment cycle from every two years to annually. However, in order to ensure greater fiscal predictability for manufacturers, the government should commit to implementing measures that it has previously announced. For example, we are concerned that the inflation adjustment for this year was not implemented on 1 July as already mandated.

“Going forward, a recovery of the domestic business is critical for business growth and to further contribute to the growth of manufacturing as a pillar of the Government’s “Big Four” agenda.

“However, a major threat is posed by the illegal market, which has grown substantially in recent years. While we welcome the Government’s concerted action on illicit trade, this principally addresses counterfeit goods, which is only a small  part  of a  much  wider problem  in  relation  to  cigarettes. If the billions of shillings in  tax  revenue currently lost due this illegal activity are to be recouped, Government needs to focus additional efforts on illegal products in the form of tax-evaded cigarettes – i.e. cigarettes with fake tax stamps, cigarettes for export that are not sold in their destination market and cigarettes smuggled into Kenya. More aggressive enforcement measures are therefore required to shut down manufacturers, dealers and traders who are facilitating tax-evaded cigarettes

that adversely impacts the Kenyan cigarette market and government revenues.

“Furthermore, a stable and fair-trading environment in the region is important to the country’s economic growth. We commend the Government’s efforts and progress made in addressing trade disputes with our neighbours and subsequent improvement of trading terms for some manufacturing sectors, however, urgent action is required to address the imbalance that exists for Kenyan tobacco manufacturers.”

Also commenting on the results, BAT Kenya Chairman, George Maina said:

“As we continue into 2018 and onwards, I want to reiterate BAT Kenya’s commitment to a sustained contribution to the country’s economic growth by continuously investing in the business. With the exceptional quality of talent within  the  Company,  access  to the  international  knowledge  and  expertise  of  the  BAT  Group,  along  with  the partnerships we have with over 80,000 trade partners and tobacco farmers, I am confident that we have the right strategy and the right people to deliver business growth and continued value to all our stakeholders in the years ahead.”