BAT Kenya is moving beyond tobacco to ensure its survival. The company seeks to shore up its export business with a new Ksh2.5 billion factory for non-smoking nicotine products. BAT Kenya paid a dividend of Ksh33.50 per share.
|Isuzu East Africa CEO Rita Kavashe
BAT Kenya PLC (BAT) has appointed Isuzu East Africa CEO Rita Kavashe to its board of directors. Kavashe brings to the board rich experience and expertise in sales and marketing that BAT Kenya can count on as it works to transform its business. Kavashe joins famed business leaders like former KCB Group CEO Martin Oduor-Otieno on the board of the tobacco company.
Faced with the tightening regulations in the tobacco cigarettes market that are raising its operating costs and slashing its profits, BAT Kenya is turning to the manufacturing of non-smoking products to drive its future growth if not ensure its survival. For example, the company has ventured into the manufacturing of oral nicotine pouches, a type of tobacco-free non-smoking product.
Oral nicotine pouch is inserted between the lip and gum to deliver the stimulation that tobacco smokers seek. But oral nicotine pouch is thought to deliver nicotine fix without the harmful chemicals in tobacco.
Notably, the appointment of Isuzu boss Rita Kavashe to BAT Kenya board comes as the company sets up a Ksh2.5 billion factory to produce oral nicotine pouches for sale across Africa.
“Given the high incidence of oral stimulant use amongst smokers, we believe that this new product category [oral nicotine pouches] will provide a viable alternative to smoking,” BAT Kenya CEO Beverley Spencer-Obatoyinbo told investors in February this year.
BAT Kenya struggling with high taxes and competition from counterfeit cigarettes
Although BAT Kenya is looking beyond tobacco market to ensure its survival, it expects tobacco cigarette sales to remain its main revenue source for a long time. Kavashe joins the BAT Kenya board at a time when the company is seeking the government’s ear on tax issues and the fight against black market cigarettes.
According to BAT Kenya, counterfeit cigarettes continue to flow into Kenya through the Uganda border. The company says the counterfeit cigars not only give it unfair competition because they are cheaper but also cause the government to lose tax revenue. Moreover, BAT Kenya wants the government to look into the frequent increases in tax on tobacco products.
Isuzu boss Kavashe’s high-profile contacts and network in the government and private sector could also be vital to BAT Kenya toward navigating the complex tobacco regulatory environment as well as other policy lobbying efforts. Kavashe is the chair of Kenya Roads Board, a government agency that spearheads the development of Kenya’s road network.
Moreover, Kavashe is a member of the Kenya Vision 2030 delivery board, which leads policy-making for the Kenya Vision 2030 programme that seeks to transform Kenya into an industrialised, middleclass economy. Kavashe sits on the Vision 2030 delivery board alongside senior government officials, including Central Bank boss Patrick Njoroge and Attorney General Paul Kihara Kariuki.
Additionally, Rita Kavashe is the vice-chair of Kenya Private Sector Alliance, the private sector umbrella body whose work include engaging the government to ensure its policies promote the success of domestic companies and businesses.
BAT Kenya pays Ksh33.50 dividend per share
BAT Kenya’s revenue rose over 15% to Ksh24 billion in 2019 but profit for the period dropped about 5% to Khs3.9 billion on high taxes. The company paid dividend of Ksh33.50 per share to its shareholders out of the profit it made last year.
Finally, BAT Kenya shares closed at Ksh310 last Friday. The Covid-19 driven selloff in the stock market has caught up with BAT Kenya, whose shares currently trade 38% below where they started the year.