, NAIROBI, Kenya, Apr 30 – Cigarette maker British American Tobacco (BAT) has ruled out the possibility of investing in new factories in Kenya.
The company’s out going Managing Director Gary Fagan said on Tuesday that although there has been pressure from new county governments, such proposals have not been driven by factual business thoughts.
He said: “We are expecting more demands from the different counties because of the huge expectations.
However, setting up additional factories in these zones will not make any business sense.”
He told a media briefing moments after the firm held its Annual General Meeting [AGM] in Nairobi that the firm will maintain its business strategy in as far tobacco growth and cigarette manufacturing is concerned.
“New factories mean additional pressures on the business. It also means high energy costs and a reduction in the quality of our products. That might translate into reduction of market share,” he explained.
Currently, the firm has some 5,000 farmers under contract in the key tobacco growing zones of Eastern, Western and South Nyanza. It is the only listed cigarette manufacturer in a market that has more than 30,000 farmers cultivating tobacco as one of their key cash crops.
At the same time, the company named the sale of illicit products as one of the key risks of its business in Kenya. Although there has been a sustained effort to increase excise taxes, BAT feels that such a measure will lead to an up surge in illicit cigarettes. The potential impact [of illicit trade] is an erosion of brand equity, investments in trade marketing and distribution is also undermined. BAT is also warning that this will also lead to lower industry and government revenues.
During the last financial year, the company’s gross revenues grew by six percent while profits before tax grew by a similar margin to Sh4.8 billion – up from the previous period’s Sh4.5 billion.
The firm’s contribution to the government in the form of excise duty, VAT and Corporate Tax increased by 25 percent during the last financial year to Sh19.1 billion.
The firm further announced that its Managing Director, Fagan is expected to leave the cigarette-maker in June this year after close to five years in charge.
The chairman, Evanson Mwaniki announced that a recruitment process has already started that will open the way for a new Chief executive & managing Director of the company.