BAT Kenya Reports 18.8% Decline In Net Profit Amid Taxation Challenges

British American Tobacco (BAT) Kenya, one of the leading tobacco manufacturers in the country, has announced an 18.8% decrease in its net profit for the fiscal year 2023. The company’s net profit dropped to KSh5.6 billion from KSh6.9 billion in 2022, according to its audited financial results for the year ended December 31, 2023.

BAT Kenya’s gross sales also experienced a 2% decline, totalling KSh41.2 billion for the year. Operating costs increased by 1% to KSh17.6 billion, while pre-tax profit decreased by 19% to KSh8.0 billion.

In addition to the financial challenges, shareholders’ funds decreased to KSh16.3 billion from KSh16.4 billion in 2022. Revenue declined to KSh25.6 billion from KSh27.4 billion, with earnings per share dropping to KSh55.68 from KSh68.92 in 2022.

The company attributed these financial results to various factors including geopolitical disruptions, increased cost of living, currency devaluation, rising interest rates, and tax hikes, all of which significantly impacted the tobacco business.

Domestically, BAT Kenya faced challenges related to consumer affordability, leading to a shift towards lower-priced brands and a rise in the prevalence of illicit trade in tax-evaded cigarettes. Regulatory uncertainty also disrupted the supply chain, particularly concerning BAT Kenya’s modern oral category, hampering its market reach.

Despite these challenges, BAT Kenya remains committed to its shareholders, proposing a final dividend of KSh45.00 per share for the year 2023, subject to approval at the Annual General Meeting scheduled for June 26, 2024. The total dividend, including the interim dividend, amounts to KSh50.00 per share.

BAT Kenya’s share price closed at KSh423.00 on February 14, 2024, a 0.5% decrease from its previous closing price. The company’s counter has seen a 3.8% increase since the beginning of 2024, positioning it as the 22nd best-performing stock on the Nairobi Securities Exchange in terms of year-to-date performance.