BAT Malaysia Q3 Net Profit Up 18%, Declares 68 Sen Dividend

Source from:  Malaysian Digest  10/29/2013

British American Tobacco (Malaysia) Bhd (BAT), which saw an 18% jump in third-quarter net profit thanks to price increases and export volume growth, has declared a third interim dividend of 68 sen.

BAT Malaysia's brand portfolio includes Dunhill, Kent, Pall Mall and Peter Stuyvesant.

The cigarette company registered a net profit of RM219.3 million for the three months ended Sept 30, 2013 (Q3), compared with RM185.7 million a year ago.

Revenue for Q3 was also higher at RM1.17 billion from RM1.16 billion.

"Dunhill continues to perform extremely well, growing 1.5 percentage point ahead of the same period last year. Notably all the Dunhill's stock-keeping units (SKUs) have either grown market share or remained stable, with both Dunhill Switch and Ice adding 0.4 percentage point from last year.

"In Q3, the group has launched Dunhill Kretek, the first premium kretek in the market and Peter Stuyvesant was upgraded with a freshness seal," said BAT managing director Stefano Clini in a statement yesterday. Its year-to-date market share currently stands at 61.8%.

"Overall, we are happy with our share performance, particularly Dunhill, but we are concerned about legal industry volume decline due to the continually high level of illegal cigarettes in the market. The recent disappointing high excise increase only exacerbates the situation," he added.

The group made a net profit of RM634.35 million for the nine-month period ended Sept 30, 2013, up 6% from RM601.03 million a year ago, while revenue rose 5% to RM3.42 billion from RM3.27 billion.

"The current state of the economy and further potential constriction of consumers' disposable incomes will not bode well for consumer goods. Based on the current dynamics, we expect a contraction of the legal market in the months to come, particularly as a result of consumers down trading to illegal cigarettes.

"If there is ever a time for a game changer to curb the illegal cigarette trade and claw back lost revenues, the time is now," added Clini.

BAT also lamented the high levels of illegal cigarette consumption in Malaysia at 34.5%. It also censured health proponents who laud the virtues of increasing cigarette excise to reduce consumption, focusing only on the legal industry but ignoring that consumers are merely substituting legal cigarettes for illegal products.

"We commend the bold proposal by the director-general of the Royal Malaysian Customs on making the sale and possession of illegal cigarettes punishable with a mandatory imprisonment term," said Clini.

"We also laud the Ministry of Home Affairs' and Royal Malaysian Police's ongoing efforts in Ops Cantas Khas to stamp out criminal syndicates and deprive them of their ill-gotten gains, as this would serve as a deterrent given that their motivation is financial gain.

"We believe illegal cigarette smuggling is part of these criminal networks and we hope that game changing efforts such as Ops Cantas Khas will be extended to address illegal cigarette trade," Clini added. Enditem