BAT retrenchment costs hit Sh1.1bn in four years

Cigarette production at BAT factory in Nairobi. FILE PHOTO | NMG 

By VICTOR JUMA
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Summary

• The cigarette manufacturer started automating its Nairobi factory in 2015, a move that allowed it to commence the trimming of its payroll the next year.
• Increased automation saw BAT spend Sh338.1 million in retrenchment costs in 2016 and Sh392 million the following year.
• The redundancy expense was lowest in 2018 at Sh29.8 million.

BAT Kenya spent Sh385.8 million to lay off part of its workforce in the year ended December 2019, taking its total retrenchment costs over the past four years to Sh1.1 billion.

The cigarette manufacturer started automating its Nairobi factory in 2015, a move that allowed it to commence the trimming of its payroll the next year.

“The (Sh385.5 million) reorganisation costs were mainly a result of continued gains from embedding innovative ways of working using technology in the factory as we build the business for a better tomorrow,” BAT said in its latest annual report.

It added that some senior employees also lost their jobs following a global restructuring initiated by its London-based parent firm BAT Plc.

Increased automation saw BAT spend Sh338.1 million in retrenchment costs in 2016 and Sh392 million the following year.

The redundancy expense was lowest in 2018 at Sh29.8 million.

The Nairobi Securities Exchange-listed firm said it invested further in its “integrated work systems (IWS)” programme last year, squeezing out further savings and enhancing productivity at the factory.

“Since its introduction in 2015, IWS has consistently delivered breakthrough results in factory efficiencies, savings, waste reduction and consistent delivery of quality tobacco products,” BAT said in the report.

“In 2019, our focus on loss elimination facilitated cost savings amounting to approximately Sh108 million, which was reinvested into the factory.”

The reduction in costs helped BAT report a 5.9 percent increase in net profit to Sh2.6 billion in the half year ended June 2020 despite lower sales.