American Tobacco Kenya
BAT Kenya
BAT Kenya’s
Blair Investment Bank
Nairobi Securities Exchange-listed
Standard Investment Bank

BAT slams brakes on 100pc profit payouts

Cigarette maker BAT Kenya #ticker:BAT has slammed brakes on its longstanding policy of paying out almost the entire net earnings as dividend.

British American Tobacco Kenya (BAT) broke with the tradition in the distribution for the year ended December, which amounted to 78 per cent of net profit or Sh26 per share.

“We review the policy every single year. The business has been in the shape such that we could give 100 per cent in previous years. All of a sudden in the new environment it would not be prudent to do so,” Ms Spencer-Obatoyinbo said in an interview on the sidelines of the firm’s annual general meeting in Nairobi on Friday.

“We have not completely written off the 100 per cent (profit payout policy) but this is a review we do as a board on an annual basis,” she added.

The Nairobi Securities Exchange-listed company’s share price has become one of the priciest given the hefty dividend payments over the past few years.

The firm reported a 21.2 per cent drop in net profit for the full year to Sh3.3 billion, attributing it to lower sales in the wake of a weak performance in the Kenyan and export markets.

This has disappointed investors who have been enjoying higher payouts in recent years, a key factor in driving the share price to the upper triple digits.

BAT Kenya’s share price has fallen to a three-and-half-year low at the NSE following the announcement of a decline in profit and dividend for the full year ended December 2017.

The stock stood at Sh600 per share by close of Friday, 4.76 per cent, down from the previous day’s Sh630.00 per share.

The company is operating under an increasingly difficult regulatory environment following the enactment of new laws meant to curb tobacco consumption, which has been linked to cancer.

“BAT retreated to its lowest level since September 2015, mainly on foreign investor buying as the tobacco maker found support at the lower level after the rather disappointing 2017 results,” said Standard Investment Bank in a market update.

“We await to see whether the change in payout policy is a one-off or will remain as this will have a significant impact on investor expectations,” said Dyer & Blair Investment Bank in their analysis of the company’s results earlier.

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