Joseph Bonyo

3 August 2010

Nairobi — British American Tobacco (Kenya) is diversifying into the export of semi-processed tobacco after investing Sh350 million in a processing plant to increase its revenue sources.

The firm, which begun exporting the leaf this month, has plants in South Africa, Nigeria, Turkey and Kenya serving its Middle East and African markets.

It plans to leverage on the plants in both the East African Community and Common Market for Eastern and Southern Africa trading blocs.

"We are targeting the trading blocs since we are placed strategically in the region in terms of the processing plants that are available," Mr Lawrence Kimathi, finance director told the Daily Nation.

The export business will be crucial for the firm, which has seen its domestic market shrink over the past four years.

In the first half of 2010, the firm only managed to grow its market by 1.5 per cent.

According to Mr Kimathi who was speaking on the sidelines of the firm's investor briefing in Nairobi, the initiative is expected to break even in three years.

"We expect that this area will be about 40 per cent of our portfolio and pay back on the investments to come in the third year," he noted.

Restricted by the Tobacco Control Act, the company grew its sales by six per cent in the period.

However, it indicated that its 19 per cent growth in pre tax profit for the six months was largely attributed to the domestic market.

The firm posted Sh1.4 billion in the period compared to Sh1.2 billion it had in the previous year.

"We have witnessed an improved business operating environment, improved distribution and price stability in the market," said Mr Gary Fagan, managing director.

In the past the listed firm has complained of a lack of uniformed enforcement of the law by the implementing agency.

This, it has claimed, is giving some of its competitor's undue advantage as they continue with promotions and sponsorships.