- Net profit grew to Sh5.5 billion from Sh3.9 billion in 2019
- The fall in local sales was however mitigated by higher export sales in the period.
Drastic cut on operation costs saw British American Tobacco's profits for the year ended December 31,2020 rise 41 per cent despite low sales.
The listed cigarette maker reported a net profit of Sh5.5 billion during the period under review compared to Sh3.9 billion same period in 2019.
Cost of operations in the year reduced by three per cent to Sh17.8 billion driven largely by the company’s pro-active cost savings initiatives undertaken to cushion its business from the pandemic.
According to the financial statement, BAT’s tax liability reduced by Sh2 billion to Sh16 billion on the back of the temporal reduction of corporation tax and value added tax (VAT) and lower sales volumes.
Even so, the firm's revenues reduced by two per cent to Sh38.8 billion with its domestic sales slumping by 24 per cent from effects of the COVID-19 pandemic.
The fall in local sales was however mitigated by higher export sales in the period.
“Last year saw our domestic performance take a significant hit, with volumes declining by 24 per cent, as consumers responded to affordability challenges resulting from the impacts of Covid-19 by flocking to the illicit market, 'BAT MD Crispin Achola said.
He decried illicit trade in the sector, saying counterfeit products continue to significantly impact industry revenues and deny Government in excess of an estimated Sh4 billion per annum in revenue.
As a result, and despite significant excise increases in 2020 (five per cent )and 2019 (20 per cent), tax payments to the exchequer were down by 11 per cent on the back of lower volumes.
The firm is however optimistic about the future, hoping to a better post Covid-19 performance.
“As we ramp up efforts to further enhance business resilience in 2021, our key focus remains on ensuring employee health and safety as the Covid-19 pandemic persists,''Achola said.
BAT chairperson Rita Kavashe said that as the economy struggles to get back on its feet following the devastating impacts of Covid-19, it is crucial that the Government does not sacrifice long term sustainability for short term gains.
''Now more than ever, the business community needs fiscal certainty – a clear and predictable tax regime that allows legitimate industry players to better manage the threat posed to Government revenues by illicit trade,'' Kavashe.
She added that the resilient performance of the business provides the company with an opportunity to build further on ambition to deliver for stakeholders.