BRITISH AMERICAN TOBACCO KENYA: PUFFING DIDN'T PAY WELL

The audited figures for the financial year 2017 released recently by Kenya's British American Tobacco PLC showed quite clearly that not only was there less puffing of its products, but more importantly, the bottom line grew thinner.

BAT reported 6.02% drop in gross revenue to Ksh34.468bn and attributed this to lower domestic production volume and weaker product due to excise duty led price increases.

It was all due to "unexpectedly difficult period" in Kenya and in the company's export markets in East Africa.

Yet, despite new excise duties, direct cost dropped at a faster rate by 6.13% to Ksh 15.79bn delivering a much reduced 5.92% drop in gross profit to Ksh 18.67bn. But this advantage was soon lost and so, BAT ended with 17.7% drop in profit before tac to Ksh 4.867bn.

First, cost of operations that generated the lower gross income, dropped by only 2.89% to Ksh 12.92bn resulting in double digit (12.1%) drop in operating profit to Ksh 5.75bn from 2016's Ksh 6.54bn.

Second, finance costs jumped by 67.5% to Ksh494m and cost of reorganisation rise by 16% to Ksh 392m.

In the end, compared to Ksh 16.1 profit on every Ksh 100 income in 2016, BAT settled for Ksh 14.1 this time.

In view of this, the company's liquidity position was more stretched within the year ending with Ksh 2.09bn working capital against Ksh 2.62bn previously.

But, inspire of this and the distributable profit drop, the directors are recommending final dividend of Ksh 22.50 per share which, added to interim dividend earlier paid, should bring total dividend for year to Ksh 26 per share.

The final dividend is to be paid to shareholders in the company's register by March 16, this year and all be paid once it is approved by shareholders at annual general meeting scheduled for May 11.

BRITISH AMERICAN TOBACCO: Ksh bn.
                               2017.           2016
Gross revenue   34.468.         36.676
Direct cost.        15.794.         16.826
Gross revenue.  18.674.         19.850
Operations cost 12.921.        13.956
Operating profit    5.753.          6.544
Finance costs.      0.494.          0.295
Reorganisation.    0.392.          0.338
Profit before tax   4.867.          5.911
Profit margin %.    14.1.            16.1
Working capital       2.091.          2.621
 

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