BAT to Process More Cigarettes in Kenya

Source from:  The Star  03/05/2014

BRITISH American Tobacco has projected to process 40.74 per cent more tobacco leaf at its Thika plant this year compared to last year.

This follows the shut down of its factories in Kampala and Kinshasa effective this month. The leaf from Uganda and DRC Congo will therefore be transported to the Thika plant for processing. Head of operations Dirk Eloff said a total of 38,000 tonnes of tobacco leaf will be processed at the Thika plant up from about 27,000 tonnes in 2013. This will mainly be spurred by volumes from the Kampala plant, he said, adding that leaf from the Kinshasa factory was "very small". About 7,000 tonnes will come from Kenya, 4,000 from Uganda while the rest will be shipped from BAT global tobacco pool-- overseas markets where BAT has presence like India and China.

The company had announced closure of processing in DRC last December which was preceded by a similar announcement for Uganda in June 2013. Chief executive Chris Burrell said the closure of the two plants will cut operation costs. "(It) will improve our efficiencies, reduce our unit costs and drive improvements in our frontier markets," he said after an investor briefing on Friday. Burrell said assets at closed plants in Uganda and DRC will be disposed off through auction after undergoing due process. The company has in recent years faced a backlash over "health hazards" of its tobacco farming activities in Western Kenya amid low returns for contracted farmers.

"We have never forced any farmer to grow tobacco," Eloff said. He said the share of revenue paid to farmers grew "13 per cent in 2013 to about Sh1.2 billion from below Sh1 billion the previous year". The cigarette maker however said it was losing losing about four per cent of its annual revenues to smuggling mainly through Western Kenya. Burrell said Lake Victoria was the main entry point of smuggled cigarettes.

Revenues from sales in 2013 rose by a marginal 1.08 per cent to Sh19.62 billion from Sh19.41 billion in 2012. Burrell said domestic sales contributed Sh10.9 billion while exports raked in Sh8.7 billion to the income. Enditem