British American Tobacco Kenya pledges to continue paying out its entire net earnings as dividend to shareholders, sweetening deal for investors who got 3.7B shillings last year

Nevin Barich

KENYA , May 4, 2014 (Business Daily) – Cigarette maker BAT Kenya has pledged to continue paying out its entire net earnings as dividend to shareholders, sweetening the deal for investors who got Sh3.7 billion last year.

The Nairobi Securities Exchange-listed company's share price has become one of the priciest as the manufacturer has sustained hefty dividend payments over the past six years.

British American Tobacco (BAT) Kenya's managing director Chris Burrell says it will continue paying out entire earnings as dividends.

"It will continue to be our policy to distribute 100 per cent of profit after tax as dividends," said Mr Burrell.

Last year the company paid a record amount of Sh37 per share, and Mr Burrell is signalling an even higher pay for this financial year.

"We are confident of our ability to continue delivering growth," he told shareholders at the firm's annual general (AGM) meeting last week.

Mr Burrel was hired in June last year as managing director to succeed Gary Fagan who had served since 2008.

READ: BAT pays out entire net earnings of Sh3.7bn as dividend after profit jump

The generous dividend policy will be a boon for London-based multinational British American Tobacco plc. which has a 60 per cent stake in the Kenyan unit.

The London Stock Exchange-listed tobacco firm earned Sh2.2 billion in dividends last year and Sh1.9 billion in 2012.

In total, BAT plc. has minted a total of Sh12.4 billion in dividends over the last decade from its Kenyan subsidiary, making it the biggest beneficiary of the company's super-dividend pay-out.

BAT Kenya has shrugged off the Treasury's increased appetite to slap sin taxes on tobacco products and Kenya's stiff anti-tobacco regulations to nearly double sales to Sh31.9 billion last year from Sh18.7 billion in 2009.

The dividend pay-out over the last five years has more than doubled to last year's Sh37 a share from Sh14.75 a piece in 2009.

READ: BAT share touches new high of Sh635

The firm plans to spend Sh1.4 billion this year in capital expenditure to improve the capacity of its leaf threshing plant in Thika.

BAT Kenya exports its products to more than 15 regional markets, which accounted for less than half or 45 per cent of its revenue last year.

Exports of semi-processed tobacco technically referred to as "cut rag" to the Egyptian market plunged 54.5 per cent to Sh1.3 billion from Sh3 billion in 2012 blamed on the civil strife and instability in the North African country.

The company is banking on its local and regional cigarette brands such as Sportsman, Embassy, SM and Safari – which account for more than 95 per cent of sales – to grow its earnings.

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