BAT Ready to Counter Impact of Pack Ruling

Source from:  Business Times 04/21/2010

CIGARETTE maker British American Tobacco (Malaysia) Bhd (4162) said it has lined up strategies to counter the impact of a new rule that bans the sale of small packs starting June 1 this year. "This will be another challenging year for different reasons, but we have been preparing as we are aware of this for a long time," finance director Stephen James Rush said after its annual shareholder meeting in Petaling Jaya, Selangor yesterday. "We need to convince the customers of Dunhill 14s not to change brand by giving them extra features. We have successfully launched the Dunhill Reloc, and there are other plans too. We believe we can meet the challenge." Reloc is a new pack design with a resealable feature to keep the cigarettes fresh, which may help convince customers to convert to the bigger packs of 20s, especially since they are cheaper for every stick. BAT had estimated that it will lose RM80 million in operating profit a year once the new rules kick in requiring it to withdraw cigarette packs with fewer than 20 sticks. Besides that, the uncertainties arising from the implementation of the Asean Free Trade Area and the rapid growth of illicit cigarette trade will pose challenges to the company, chairman Tan Sri Abu Talib Othman said. "I think the Customs have done quite well over the past year to deter smuggling of cigarettes. We hope that the government will look into more deterrent measures such as stricter penalties, as fines alone will only be a cost of doing business for the illegal operator," Abu Talib said. Its net profit fell 8 per cent to RM747 million last year, on a 5 per cent lower revenue as consumers spent less in a tougher economy. The trade of illicit cigarettes also rose sharply last year, resulting in lower sales for the industry. Enditem