BAT STILL OPTIMISTIC ON GROWTH DESPITE TIGHTENING TOBACCO LEGISLATIONS

Source from:  Bernama - Friday, April 18PETALING JAYA, April 17 (Bernama) 04/18/2008

British American Tobacco (Malaysia) Bhd (BAT) is still optimistic about its growth performance of this year despite the challenges in a tobacco industry pressured by tightening tobacco legislations, high level of illicit tobacco trade and inflationary pressure. The company posted a net profit of RM732 million in the financial year ended Dec 31, 2007, an increase of two percent from 2006, while its turnover went up by six percent to RM3.8 billion. BAT's managing director, Jack Bowles, said today that although there are still challenges aplenty, BAT will continue focusing on its strategic imperatives to generate growth, enhance productivity and manage its business responsibility with a winning organisation. "Despite the challenging year for the tobacco industry, we believe that we can win within the legal cigarette industry as we have strong brands in the market," he told reporters after the company's annual general meeting here. To address the challenge posed by the illicit cigarette trade, Bowles said, BAT hoped the government will consider tax increases that are moderate and gradual. The Contraband & Unauthorised Cigarette Study by the Confederation of Malaysian Tobacco Manufacturers (CMTM) has indicated that illicit cigarette trade levels had increased to 24 percent in 2007 from 14 percent of total trade in 2004 while the illicit white cigarettes segment jumped by 32 percent in the peninsula after the 25 percent excise hike in July 2007. "Our concern is the high and sporadic tax increases which not only amplify illicit trade and is a problem to us but is also a problem for the government," he added. Bowles said large increases in retail prices due to higher taxes will drive adult consumers to turn to affordable alternatives, namely cheap illegal cigarettes. "This not only also results in losses through tax leakages estimated at RM1.2 billion annually but also does not support the government's health agenda of reducing cigarette consumption," he contended. "When sales of legal locally manufactured cigarette decline, the demand for local tobacco leaf declines and this impacts the sustainability of the local tobacco leaf industry which in turn impacts the livelihood of Malaysian tobacco farmers," he argued. Bowles said that equally important in addressing illicit cigarette is effective enforcement measures which are strong and uncompromising in order to avoid worsening the already rampant levels of the illicit cigarette trade. BAT hopes that there will be stronger penalties levied on illicit traders, he added. On tightening the tobacco control regulations, he said BAT hopes this will be balanced and effectively enforced. BAT arose from the merger of Rothmans of Pall Mall (Malaysia) Bhd and Malaysian Tobacco Company Bhd in November 1999. The company is the market leader of the Malaysian cigarette industry with more than 60 percent market share. Its portfolio of brands includes Dunhill, Benson & Hedges, Peter Stuyvesant and Pall Mall. Enditem