British American Tobacco (BAT) Kenya has reported a significant drop in its full-year net profit for 2024, citing illicit trade and the strengthening of the Kenyan shilling as key contributing factors. The company’s net profit declined to Ksh 4.5 billion from Ksh 5.57 billion in 2023, reflecting a challenging business environment.
According to BAT, regulatory uncertainty, increased illicit trade in tax-evaded cigarettes, and reduced consumer purchasing power all played a role in the profit decline. The company continues to face stiff competition from counterfeit and smuggled products that do not adhere to tax regulations, affecting its market share and revenue stream.
Another major setback for BAT was the sharp increase in finance costs, which surged by Ksh 955 million to reach Ksh 800 million. This spike was primarily due to the appreciation of the Kenyan shilling against the US dollar in the first quarter of 2024. The stronger local currency increased the cost of financing, further pressuring the company’s earnings.
Despite the lower profitability, BAT maintained a consistent dividend payout for its shareholders. The company confirmed that shareholders will receive Ksh 50 per share in June 2024, mirroring last year’s payout. This move signals the company’s commitment to shareholder returns even amid financial headwinds.
In addition to these challenges, BAT faced a substantial tax burden, having paid Ksh 2 billion in income tax expenses for the year. The company continues to operate in a high-tax environment, which, combined with illicit trade, has squeezed its profit margins.
Looking ahead, BAT is calling on the government to step up enforcement efforts against the illicit cigarette trade, which it views as a significant threat to both its business and government tax revenues. The firm has also pledged to work closely with relevant agencies in neighboring countries to combat the proliferation of untaxed cigarettes in the region.
As BAT navigates these hurdles, the broader tobacco industry in Kenya remains under pressure from regulatory shifts, changing consumer behavior, and economic fluctuations. The company’s ability to adapt to these challenges while maintaining profitability and investor confidence will be crucial in the coming years.
