BAT Kenya delivers solid half-year results despite difficult environment

British American Tobacco Kenya has reported a solid performance in the first half of 2021, posting a profit of 2.7 billion shillings. This growth comes amidst a challenging operating environment marked by the impact of the COVID-19 pandemic and increased excise on cigarettes. The company's net revenues also saw a significant increase of 19 percent, reaching 12.5 billion shillings driven by the recovery of domestic sales volumes. Philemon Kipkemoi, the Finance Director at BAT Kenya, shared insights on the company's performance and outlined the key drivers behind this success. One of the key factors contributing to BAT Kenya's resilient performance was its ongoing investment in brand transformation. Over the past two years, the company has been focusing on shifting its portfolio towards more innovative and global brands, such as Sportsman into Roveman, leading to a positive impact on volumes. Additionally, the easing of restrictions in the operating environment compared to the previous year has provided more opportunities for trade partners, resulting in increased availability of BAT's products in the market. Furthermore, BAT Kenya extended support to its trade partners by collaborating with local financial institutions to provide credit, helping them to recapitalize their businesses amid the pandemic. This strategic move not only boosted domestic volumes but also strengthened relationships within the value chain. Despite a 27 percent increase in the cost of operations, primarily driven by brand investments and volume growth, BAT Kenya remains confident about managing its costs effectively in the coming months. The company's future outlook includes a focus on accelerating the transformation of the industry towards offering consumers a greater choice of less risky and innovative products. BAT Kenya has completed a significant phase of investment in its factory, gearing up to produce nicotine pouches for both domestic and export markets. This aligns with BAT's global purpose of creating a better tomorrow for consumers through product innovation and supporting the government's manufacturing agenda. BAT Kenya has also been addressing the challenge of illicit trade, which has seen a sharp increase to an estimated 23 percent. This has posed both competitive and revenue challenges for the company, with one in four cigarettes being sold illegally. BAT Kenya is actively working with authorities to enforce regulations and monitor manufacturing processes to combat illicit trade and protect government revenue. Despite the rise in excise rates and the influx of cheaper illicit products from neighboring countries, BAT Kenya remains committed to delivering value to its shareholders. The company recently declared an interim dividend of three shillings and fifty cents per share, reflecting its strong financial position and cash flow management strategies. Looking ahead, BAT Kenya aims to sustain its dividend payouts while focusing on driving growth through brand transformation and market expansion. In conclusion, BAT Kenya's robust performance in the face of a challenging environment showcases its resilience and strategic vision for the future. By continuing to invest in innovation, support trade partners, and address industry challenges, the company is well-positioned to navigate uncertainties and drive sustainable growth in the tobacco industry.