BAT profit drops 19pc on strong shilling
BAT Kenya managing director Crispin Achola when he appeared before the National Assembly Committee on Trade, Industry and Cooperatives at Continental House Nairobi on September 11, 2024.
BAT Kenya registered a 19.4 per cent decline in net profit to Sh4.4 billion in the year ended December 2024 when it suffered from higher operating costs and lower income from exports due to a stronger shilling.
The company had posted a net profit of Sh5.5 billion a year earlier.
BAT declared a final dividend of Sh45 per share, maintaining its total distribution to Sh50 per share including an interim payout made in September last year.
The new dividend will be paid on June 25 to shareholders who will be on the register on May 23.
The cigarettes manufacturer’s net sales rose marginally to Sh25.7 billion in the review period but higher costs and reduced income from export sales led to the profit drop.
Finance costs, capturing the impact of the shilling’s dramatic gain early last year on the company’s export sales, stood at Sh829 million.
This reversed a finance income of Sh97 million a year earlier.
“Further, revenues from United States Dollar-denominated export sales were adversely impacted, resulting in foreign exchange losses following the appreciation of Kenya shilling,” BAT said in a statement.
The company added that most of the currency impact occurred in the first quarter of 2024 when the shilling gained about 20 per cent against the American currency.
BAT’s domestic and export sales are split about 50/50, meaning that major currency movements can have a significant impact on its earnings.
The company’s cost of operations rose by Sh771 million to Sh18.4 billion, further crimping its profit.
BAT said the jump in cost of doing business was partly offset by benefits from unspecified cost-cutting measures that were implemented in the period.
The company decried illicit trade in tax-evaded cigarettes which it says has an estimated market share of 37 percent according to third party research.
BAT added that it is ready to revive its diversification into oral nicotine products once it receives regulatory clearance.
The company was forced to stop its venture into the new product category amid policy uncertainty.
“Prolonged regulatory uncertainty resulted in the suspension of our modern oral nicotine pouch sales in the domestic market, subsequently impeding our ability to commercialise our oral nicotine pouch factory in Nairobi,” BAT said.
“This resulted in the company accepting offers for disposal of related machinery to protect shareholder value.”
Manufacturers like BAT see oral nicotine and inhalable products as key to reaching new customers.
The new products are registering the fastest growth in uptake compared to cigarettes in markets where they are allowed.
vjuma@ke.nationmedia.com