British American Tobacco (BAT) Kenya Plc, the leading tobacco company in Kenya, reported a 19.2% decrease in profits after tax (PAT) for the fiscal year ending on December 31, 2023. The company’s PAT declined to KES 5.6 billion, down from KES 6.9 billion in the preceding year.
This drop in PAT was primarily attributed to a 2.4% reduction in gross sales, which amounted to KES 41.2 billion in FY 2023 compared to KES 42.2 billion in FY 2022. The decline in sales was primarily due to decreased consumer demand resulting from adverse macroeconomic conditions, including the depreciation of the Kenyan shilling, high inflationary pressures, and supply disruptions.
Additionally, the company faced a 5.5% increase in indirect taxes, rising to KES 15.7 billion in FY 2023 from KES 14.9 billion in FY 2022. These higher taxes were driven by a 10.0% upward revision of excise duty in July 2022 and a further 6.0% increment in October 2022, leading to increased cigarette costs and reduced affordability.
Furthermore, regulatory uncertainty surrounding its modern oral product, a tobacco-free oral nicotine pouch, impacted the company’s performance.
The expiration of a temporary license to sell the product without standard-sized health warnings in July 2023 led to supply chain disruptions and the inability to commercialize its Nairobi nicotine pouch factory. BAT awaits finalization of the regulatory framework for this product, which it sees as a potentially less harmful alternative to smoking.
BAT also expanded its market reach by adding Malawi, Mozambique, Angola, Zimbabwe, and Zambia to its operational scope in May 2023, aiming to bolster revenue and profitability through leveraging its strong brand portfolio and distribution network.
The company’s board proposed a final dividend of KES 45.0 per share, subject to shareholder approval at the Annual General Meeting scheduled for June 26, 2024, with an expected book closure on May 24, 2024. The total dividend for FY 2023 is KES 50.0 per share, resulting in a dividend yield of 11.9% as of February 15, 2024, marking a 12.3% decline from the FY 2022 total dividend of KES 57.0 per share.
