Kenya: British American Tobacco Profit Up By 14 Percent, Eyes South Sudan

Source from:  Nairobi Star 07/12/2011

British American Tobacco Kenya has announced 14 per cent growth in half year pre-tax profit backed by increased sales and a depreciating shilling for its exports. The cigarette maker made Sh1.66 billion profit in the first six months of the year compared to Sh1.46 in the same period last year as its total revenue grew to Sh9.1 billion from Sh6 billion. BAT's net profit was 1.17 billion. Gary Fagan, the managing director of BAT Kenya said introduction of a tier- based excise regime late last year, which saw it cut retail price of its flagship brands, had reduced the projected revenues . "The performance was partially off set by decrease margin because of price reductions," he said "This was however cushioned by the new revenue line, commencement of the contract to export Cut Rag(semi-processed leaf) to Egypt,which contributed up to two thirds of the revenue," said Fagan. However, the company predicts slower growth in sales in the next half of the year as high inflation persists. The finance minister in this year's budget announced changes to the excise regime, introducing a mixed system under which tax is computed on the highest of 35 per cent of retail selling price of 1200 per mille. As a result, BAT increased prices of its flagship brand, Sportsman, from Sh70 to Sh90 a packet as well as other brands. "We cannot expect to maintain the 20 per cent growth in volumes in the next half, the increase in prices is most likely to impact on the consumers given they are already struggling with the high cost of living," said Fagan. BAT announced it is finalising plans to enter South Sudan before the end of the year to expand revenue. Fagan said the company is waiting for the new government to establish regulations and tax systems for the cigarette industry. Company estimates the size of that market around 1.5 billion sticks a year, which it will supply from Kenya in the short term with plans to set up a plant in the future. Enditem