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BAT books Sh2.14 billion net profit in six months

BUSINESS
By Patrick Alushula | July 16th 2016

Cigarette maker, British American Tobacco (BAT), has netted Sh2.14 billion profit for the half year ended June 30, 2016.

The profit represents an increase of 10.7 per cent compared to Sh1.94 billion that it posted in the previous half-year. The increase in profits was supported by a drop in costs. Its finance cost reduced by 63.9 per cent to Sh70 million signalling reduced borrowing. In addition, total costs of operations eased minimally to Sh7.25 billion, being a drop of 4.3 per cent. However, the revenues for the Nairobi Securities Exchange (NSE)-listed company dipped. During the period under review, BAT posted a net revenue of Sh10.4 billion. This was a marginal drop compared to Sh10.5 billion in the half year ended June 31, 2015.

The company attributed the drop to excise duty that led to an increase in the prices of cigarettes. The firm added that it booked lower contract manufacturing revenues.

Cash generated from core business activities grew by Sh1.5 billion to Sh4.12 billion as a result of improved profit and increase in working capital. Net working capital, which is the difference between current assets and current liabilities, was up 248 per cent to Sh808 million.

The excise duty pushed up government collection from the cigarette maker. Some Sh9.8 billion in form of excise duty, value added tax, corporation tax and PAYE will go to government.

Illicit trade

During the period under review, shareholders’ funds grew to Sh6.4 billion translating to a 3.8 per cent rise. In a similar six-month period last year, the funds stood at Sh6.2 billion. Shareholders will take part of the profits after the board of directors recommended an interim dividend of Sh3.50 per ordinary share. This will be paid by mid next month. As the second half of the year starts, the company remains bullish of improved performance despite the regulatory proposals that may soon be implemented.

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“We support regulations which are balanced, evidence-based and do not lead to unintended consequences such as stimulating illicit trade,” said the company in a statement. The cigarette industry has been profitable despite increased legislation such as banning public smoking.

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