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Legal industry volumes down by 9%


Petaling Jaya, 23 April 2009 – British American Tobacco (Malaysia) Berhad (BAT Malaysia) announced that the Group’s turnover was 1.5% lower at RM1,006 million compared to RM1,021 million in the same period last year as lower sales volumes have eroded gains from the higher net pricing and improved product mix. Overall industry volumes for the 1st Quarter of 2009, as measured by the Confederation of Malaysian Tobacco Manufacturers (CMTM) members’ sales, declined by 9% versus the same period last year due primarily to the increasing levels of illicit trade and impact of the global economic crisis affecting consumer spending power.

Despite the lower volumes, the Group’s portfolio, after a strategic reconfiguration over the last nine months and a period of investment, has performed strongly, especially in the premium segment with Dunhill achieving its highest ever market share. The migrations of Peter Stuyvesant to Kent and Perilly’s to Pall Mall have assisted to address the Company’s exposure to unsupported tail brands and resulted in our Global Drive Brands achieving a record 54.6% share of market, up by 2.9 percentage points compared to the same period last year.

As legal tobacco industry volumes continue to decline, the growth of illegal cigarettes however has continued unabated as shown by the Illicit Cigarette Survey conducted by the CMTM, where the level of illegal cigarettes has grown by 1.9 percentage points to an all time high of 25.7% in 2008. This translates to the alarming fact that more than one out of four cigarettes in Malaysia are illegal.

Jack Bowles, Managing Director of BAT Malaysia said, “It is anticipated that tobacco industry volumes will continue to be pressured by the high level of illegal cigarettes which is a great concern to the industry. The legal industry's loss in volumes translates of course to significant tax losses to the Government. A loss in legal volumes does not automatically translate however into a reduction in consumption as the high level of illicit trade coupled with the current economic uncertainty will lead price sensitive consumers to down trade to much cheaper illegal cigarettes."

“Given these challenges faced by an industry that is already operating in a demanding environment, we hope the Government will consider implementing a moderate and gradual excise regime as we believe steep excise increases, such as the 20% and 25% increases over the last two years, will benefit the illegal industry and in addition, further encourage smuggling activities. Smugglers not only bring illegal products into the country, they are a magnet for all kinds of crime affecting the safety of law abiding citizens,” Bowles added.

Commenting on the current level of illegal cigarettes, Bowles said, "The level of illegal cigarettes could have been higher if not for the ever-increasing and tireless efforts undertaken by enforcement agencies like the Royal Malaysian Customs (RMC). The RMC efforts have seen illegal cigarette seizures increase by 60% in 2008. We hope the enforcement agencies will continue to be vigilant in their fight against this illegal activity. The industry will also continue to give all their cooperation to the authorities to help address this problem."

For 2009, Bowles said BAT Malaysia is committed to protecting its long term leadership position within the tobacco industry and activities will continue to be rolled out to deliver shareholder value. This will be partially funded by our ongoing productivity initiatives across the business. The Company will also continue run its business responsibly and to invest in its people as it strives to be the Best Employer in Malaysia.

“Our strategic imperatives on Growth, Productivity, Responsibility and Winning Organisation have laid a strong foundation for the company to leverage on during these challenging times and we aim to hold the earnings stable for the year subject to reasonable levels of taxation and illicit trade,” concluded Bowles.

For more information on British American Tobacco Malaysia’s financial results, please visit www.batmalaysia.com 

About British American Tobacco (Malaysia) Berhad

British American Tobacco (Malaysia) Berhad (British American Tobacco Malaysia) emerged on 3rd November 1999 from the merger of Rothmans of Pall Mall (Malaysia) Berhad and Malaysian Tobacco Company Berhad. These two long established tobacco companies brought with the merger, experience and an unrivalled portfolio of highly successful international brands to create the largest tobacco company in the country.

British American Tobacco Malaysia manufactures and markets high quality tobacco products designed to meet diverse consumer preferences. Brand portfolio includes well-established international names like Dunhill, Kent and Pall Mall. British American Tobacco Malaysia has about 2,000 employees who are involved in the full spectrum of the tobacco industry, from leaf buying and processing to manufacturing, marketing and distribution.

British American Tobacco Malaysia is part of the British American Tobacco group, which is the world’s most international tobacco group and the second largest stock market listed tobacco group by global market share.

For more information, please contact British American Tobacco Malaysia:

Mr Chin Tuck Weng, Corporate Affairs Manager at 03-7941 7318 or Chin_Tuck_Weng@bat.com

Ms Annabel Ng, Corporate Communications Manager at 03-7491 7281 or Annabel_Ng@bat.com