BAT beats the Covid-19 odds as profit up 42pc

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British American Tobacco (BAT) beat the odds to afford full dividend payout by more than a third after profits for the year to December rose by 42 percent.

On Thursday, BAT announced that its profit after-tax shot up to Sh5.52 billion, a bounce back from a 4.9 percent decrease to Sh3.89 billion in 2019.

The cigarette maker announced a final dividend payment of Sh41.50 per share, making the total payout per unit for the year to Sh45, a 34.33 percent rise from Sh33.50 per share in 2019.

The dividend payout is an uplift to its shareholders’ whose stock has been regarded the best performer this year, up 22 percent to Sh437per share.

“The revenue decline was mitigated by higher export sales which demonstrated continued strategic importance of BAT Kenya hub factory in ensuring a balanced and sustainable business,” stated the cigarette maker.

The net revenue rose by 5.41 percent to Sh25.34 billion, boosted by higher exports than domestic sales which helped reduce excise duty bills in Kenya.

The domestic sales revenue decreased by 24 percent as a result of the Covid-19 pandemic leading to a 2.47 percent drop in gross revenue to Sh38.85 billion.

The reduction in the corporate income tax rate to 25 percent from 30 percent and value-added tax to 14 percent from 16 percent between April and December 2020 boosted BAT’s earnings.

Also, the company’s initiatives to cushion profit margins for stockholders amidst a pandemic economy led to a 3.07 percent decline in cost of operations to Sh17.75 billion.

The company is banking on a new factory for making oral nicotine pouches in Nairobi to boost earnings, despite opposition from public health officials.

Public health officials, led by Health Cabinet secretary Mutahi Kagwe, and civil society lobbies such as International Institute for Legislative Affairs have opposed the sale of nicotine pouches locally, trading under Lyft brand.

However, BAT Kenya assures that the new products are less detrimental to users’ health and are a substitute for cigarettes.

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Anthony Kiratu is the Founder of Finsolutions. He is a financial analyst with over 5 years experience in research, investment advisory, valuation and financial modelling. Anthony is a member of the Institute of Certified Investment and Financial Analysts and Institute of Certified Public Accountants of Kenya. He is passionate about development of African Capital Markets through training of investors and dissemination of information for sound financial and investment decision making process. He is also a part-time lecturer in the Certified Investment and Financial Analyst course in the subjects of International Finance, Portfolio Management, Equity Investment Analysis, and Fixed Income Securities. Email: anthony@finsolutions.co.ke Contact: +254 780216631

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