KENYA – Cigarette manufacturer BAT Kenya has maintained Sh350 million (US$3.2 million) interim dividend after net profit for the six months to June rose by 0.71 percent, partly slowed by increased operating cost.
The company’s half-year net profit increased by Sh19 million (US$175,519) to hit Sh2.69 billion (US$24.8 million) as sales volumes grew in the Covid-19 environment.
The board has approved an interim dividend of Sh3.50 (US$0.032) per share amounting to Sh350 million (US$3.2 million), being the same as what was paid in the preceding similar period.
The payout is set for mid-September 2021.
BAT performance came in an environment in which many businesses have been recording revenue drops due to weakened consumer demand especially on non-priority goods and services.
“Despite the challenging operating environment, increased investment behind our brands and support to our trade partners has seen the recovery of domestic volumes. This coupled with easing Covid-19 restrictions resulted in a strong financial performance,” said BAT.
Gross revenue increased by 22 percent to Sh20.25 billion (US$187 million), with the firm attributing this to a recovery in domestic sales volumes, excise duty-led price increases and sustained momentum in exports.
The Nairobi Securities Exchange-listed firm said the growth in domestic sales was partly offset by the five percent rise in excise duty that was effected in October 2020 and the change in value-added tax in January 2021.
The hikes in taxation saw BAT pay Sh7.7 billion (US$71.1 million) as excise duty and VAT, being 26.7 percent higher than the Sh6.08 billion (US$56.2 million) paid in the previous similar period.
“These tax hikes triggered price increases which generated additional pressures on consumer affordability resulting in downgrading to lower-priced brands and a high incidence of illicit trade,” said the firm.
“Despite the challenging operating environment, increased investment behind our brands and support to our trade partners has seen the recovery of domestic volumes”
Total costs of operations rose by 27 percent to Sh8.6 billion (US$79.4 million) driven by higher volumes of cigarettes sold and investment in portfolio transformation.
Finance costs, which are linked to servicing of loans, fell to Sh49 million (US$452,655) from Sh81 million (US$748,267) incurred in the previous similar half year.
BAT is eying new revenue from nicotine pouches in the Kenyan market amid continued resistance from lobbyists who argue that the product, consumed by placing between upper lip and gum, carries the same impact as smoke cigarettes.
In July 2021, Kenyan Parliament voted to introduce KSh5,000 (US$46) tax per kilo of oral nicotine pouches, down from the Treasury’s proposal of Sh1,200 (US$11).
BAT says it continues to engage the government for sustainable regulations to support the commercialization of Sh2.5 billion (US$23.1 million) new nicotine pouches factory in Nairobi.
“We welcome the government’s pragmatic approach in defining an appropriate excise framework for oral nicotine pouches,” said the firm.