BAT tobacco growers pay drops to Sh1.2bn

Cigarette plant at the BAT factory. FILE PHOTO | NMG

By BRIAN NGUGI
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BAT Kenya  paid tobacco farmers it has contracted Sh1.2 billion for

deliveries last year, representing a 14.8 percent decline the Sh1.4 billion payout they received in 2020.

The Nairobi Securities Exchange (NSE)  -listed firm said Kenyan producers delivered 7.2 million kilogrammes of leaf in 2021 compared to 8.3 million kilogrammes the previous year.

“Despite the ever-changing climate conditions, our partnership with our tobacco farmers yielded 7.2 million kilogrammes of tobacco in 2021, earning them a total net pay of Sh1.2 billion,” it says in its latest annual report.

BAT provides farmers with upfront loans for inputs to the tune of 30 percent of the potential gross income, and defaulters are not contracted for the following year.

Some farmers could also have shifted to other tobacco manufacturers or crops during the year, explaining the income and leaf delivery drop.

BAT said it had 2,000 growers under contract for the 2021 season largely concentrated in Migori, Bungoma, Meru, and Busia counties compared to 4,000 farmers as of May 2020.

The cigarette maker said earlier in 2020 its contracted leaf farmers fell to about 4,000 from about 5,000 in the previous two years as it sought to “right-size crop” supply in line with consumer demand.

Its leaf producers have in the past agitated for higher prices, arguing that they incur a high cost of inputs and inflation erodes their margins.

In 2019, BAT paid out Sh1.5 billion to 5,000 farmers who supplied 8.9 million kilogrammes of tobacco, the same as the payout in 2018.

In 2017, its contracted tobacco farmers yielded seven million kilogrammes of tobacco, earning them a total net payment of Sh831 million.

The company recorded an 18 percent rise in net profit to Sh6.5 billion for the year ended December 2021, on higher revenues and lower costs.

The company will pay its shareholders a dividend of Sh53.50 per share or a total of Sh5.3 billion, the highest payout in the history of the cigarette maker.

bnjoroge@ke.nationmedia.com