Business

BAT reports 18.8pc drop in net profit

Friday, February 16th, 2024 10:00 | By
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BAT Kenya’s net profit for the financial year ended December 31, 2023, dipped by 18.84 per cent to Sh5.6 billion from Sh6.9 billion recorded in 2022. The firm attributed the decrease to reduced revenue as a result of lower sales and increased taxes.

In the period under review, gross revenue was down by 2 per cent, settling at Sh41.2 billion mainly due to a decrease in domestic sales and cut-rag or semi-processed leaf sales.

However, the impact of this decrease was somewhat offset by the benefits gained from pricing and foreign exchange in export sales.

Input costs

The cost of operations saw a slight increase of 1 per cent, rising to Sh17.6 billion due to an increase in input costs. The firm managed to offset some of the increases through cost savings from productivity initiatives and a decrease in sales volume. Taxes, which included Excise Duty, Value Added Tax (VAT), Customs Duties, Solatium Levy, Tax Stamps, Pay As You Earn (PAYE), and Corporation Tax, increased by 5 per cent to Sh19.4 billion.

According to the results for the year ended December 31, 2023, in 2023, BAT Kenya navigated a challenging business environment due to significant economic turbulence in both domestic and export markets.

Factors such as geopolitical disruptions, cost of living pressures, currency devaluation, rising interest rates, and tax increases created a difficult trading environment.

Domestically, consumer affordability challenges led to down-trading to lower-priced brands. This, coupled with an increase in illicit trade, resulted in the shrinkage of the legitimate cigarette market.

The illicit trade continues to negatively impact industry revenues and denies the Government an estimated Sh7 billion per annum in taxes. Despite these challenges, BAT said commitment to its corporate purpose of building A Better Tomorrow remained steadfast.

“The company is achieving this by reducing the health impact of its business through offering alternative innovative products, including tobacco-free oral nicotine pouches.”

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