Following an announcement that its profit and dividend for the financial year ended 31 December 2017, British American Tobacco’s (BAT) share price slumped by 13.5 percent to Sh680, the lowest price since September 2015.
“BAT retreated to its lowest level since September 2015, mainly on foreign investor buying as the tobacco maker found support at the lower level after the rather disappointing 2017 results,” Standard Investment Bank said in a market update.
The firm recorded a 21.2 percent decline in its full-year net profit to Sh3.3 billion. The decline was blamed on weak performing Kenyan and export markets. Additionally, tobacco volumes were affected by floods and drought last year while local sales were impacted by an increase in excise tax.
The company’s dividend payout also declined because it could not pay the total net earnings to shareholders as is the norm. As a result, investors were disappointed since they were used to high payouts in the past which propelled the share price to the high triple-digit level.
In 2016, shareholders received a dividend of Sh43 following a net profit of Sh4.2 million.
“We await to see whether the change in payout policy will have a significant impact on investor expectations,” Dyer & Blair Investment Bank said in their analysis of BAT’s results.
New laws to reduce tobacco consumption, as well as unpredictable tax increases, are some of the reasons that have seen BAT’s net profit decline. Therefore, the firm wants the government to create a stable tax environment which will provide a more predictable operating environment.