BRITISH AMERICAN TOBACCO BRACING FOR TOUGH TIME

Source from:  Bernama 02/20/2009

British American Tobacco (Malaysia) Bhd (BAT) is bracing for a tough time although pre-tax profit for the year ended Dec 31, 2008, rose to RM1.081 billion from RM1.003 billion in the previous year. Its revenue increased to RM4.135 billion from RM3.831 billion previously as higher pricing and better sales mix offset lower sales volumes from the domestic market. BAT said in the fourth quarter, its pre-tax profit rose to RM215.796 million from RM208.127 million in the corresponding period of the previous year, and revenue went up to RM1.002 billion from RM948.236 million. The company recommends a net final dividend of 76.00 sen per share for the financial year ended Dec 31, 2008, subject to shareholders' approval at the company's annual general meeting on April 20, 2009. This will bring the total net dividend for the 2008 financial year to 265.00 sen per share. BAT managing director Jack Bowles said the industry was already operating in a challenging environment with the high incidence of illegal cigarettes, excise increases and enhanced regulations. Coupled with the current global economic meltdown, there is no room for complacency, he said. Bowles said moving into 2009, BAT remained committed to protecting and enhancing its leadership position and delivering long-term shareholder value with its strong brand portfolio and continuing to focus on its growth, productivity, responsibility and winning organisation strategic initiatives. "Given the challenges, we are cautiously optimistic on the outlook for 2009," he said. BAT said on the whole, the 2008 industry volume, as measured by the Confederation of Malaysian Tobacco Manufacturers members' sales, declined by 1.5 percent compared to the same period last year, driven by high levels of illegal cigarettes as well as the significant tax-led price increase in September 2008. Bowles said the impact of the economic crisis on consumer spending power added to the mounting challenges faced by the industry. "The key challenge to the industry remains the ongoing high level of illegal cigarettes in Malaysia which continue to persist as a result of high and occasionally sporadic tax increases over the past four years that have led to greater price differentials between legal and illegal cigarettes," he said. "Mindful of this, the company hopes that the government will consider tax increases that are moderate and gradual," he added. BAT said the latest study on contraband and unauthorised cigarettes incidence has recorded illegal cigarettes level at a high of 24.5 percent. "This tax-led resilience of illegal cigarettes would have been much worse if not for the ever-increasing and highly commendable efforts undertaken by enforcement agencies, especially the Royal Malaysian Customs," it said. The issue of illicit trade is not only a concern for the tobacco industry, according to Bowles. "It is also a fiscal concern for the government who is faced with significant tax losses," he said. Enditem