British American Tobacco FY19 Profit Down 4.9pct on Slow Business, Increased Taxes

British American Tobacco FY19 Profit Down 4.9pct on Slow Business, Increased Taxes
  • 9.1% growth in gross revenue
  • Final dividend per share of Ksh 30.00

British American Tobacco (BAT) posted a 4.9 percent decline in net profit for the year ended December 2019 on the back of higher taxes.

The firm’s profit after tax (PAT) reduced from KSh4.09 billion to KSh3.89 billion even as the firm posted gross revenues of KSh 39.8 billion, an increase of 9.1 percent from the previous year.

Managing Director Beverley Spencer–Obatoyino attributed the drop to increased operating costs of 26 percent which were mainly caused by the 20 percent increase in excise duty and the newly introduced solatium compensation levy of two percent on manufactured tobacco products.

“We are proud of the results given the aggressive regulatory environment we witnessed last year. The excise increment and solatium led to significant increases in regulatory costs in Kenya,” said Ms. Spencer-Obatoyinbo.

“We continue to engage the government to clarify the basis of competing this levy and ensure it does not adversely impact the company’s competitiveness especially on exports.”

The Board of Directors has proposed a final dividend in respect of the year ended 31 December 2019 of KSh 30.00 per share, subject to approval by the shareholders at the Annual General Meeting to be held on 29 April 2020.

“We are concerned about the Kenyan government’s shift from a stable inflation-adjusted excise tax increase to abrupt increases in excise taxes. Given the business was yet to recover from the 50.0% excise duty hike in 2015 as reflected in the negative net revenue performance over the last three years to FY18 (3-year CAGR -2.3%), the 20.0% tax is expected to drag further the recovery of the cigarettes revenue in the domestic market,” Genghis Capital BAT FY19 Earnings Note