BAT Kenya released its financial results for the six-month period ended June 30, 2023, reporting a 4% decrease in gross revenues to Kshs 21.0 billion in the period compared to Kshs 21.9 billion recorded during the same period in the previous year. The decline in gross revenue was attributed to lower sales resulting from the impact of excise-led price increases in the domestic market and geopolitical disruptions in key export markets. As a result, net income also experienced a decline of 3.5%, with the company reporting a profit after tax of Kshs 2.8 billion for the period ending June 2023, compared to Kshs 2.9 billion realized in June of the previous year.
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However, the cost of operations declined by Kshs 0.7 billion to Kshs 9.2 billion in June 2023 in line with sales volume and the implementation of productivity initiatives aimed at mitigating inflationary cost increases. The company’s balance sheet recorded growth in current assets, which increased by 16.8% to Kshs 14.3 billion in June 2023 compared to Kshs 11.9 billion in June of the previous year. However, this positive development was offset by an increase in current liabilities, which stood at Kshs 10.6 billion, a 93.7% increase from Kshs 5.5 billion recorded in the same period last year. This resulted in a decline in net working capital to Kshs 3.7 billion from Kshs 6.4 billion recorded in the same period the previous year. The effective management of working capital during the period contributed to a 5% increase in cash generated from operations, amounting to Kshs 3.9 billion as of June 2023.
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The company’s report highlighted that the business performance during the period was significantly impacted by global macroeconomic volatility, inflationary pressures in input costs, and geopolitical disruptions in key export markets. Moreover, the excise-led price increase in the domestic market resulted in lower sales, a shift to lower-priced brands, and an increase in the prevalence of illicit trade in tax-evaded cigarettes. The report indicated that the current estimate for illicit trade stands at 26%, adversely affecting industry revenues and depriving the government of an estimated Kshs 6.5 billion in annual revenue.
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Despite these challenges, BAT Kenya remains confident in its ability to navigate the macroeconomic landscape by investing in business simplification and establishing a consumer-centric brand portfolio. The company aims to deliver sustainable shareholder value. In line with this, the board has approved an interim dividend of KSHS 5.00 per share for the year ending December 31, 2023. The dividend is expected to be paid on or about September 22, 2023, to the company’s shareholders.
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