The Impact of High Excise Remains A Business Challenge
Petaling Jaya, 25 April 2016 – British American Tobacco (Malaysia) Berhad (BAT Malaysia), held its 55th Annual General Meeting and declared its financial results for the full year ending 2015 today.
BAT Malaysia Group registered a domestic volume contraction of 13.5 percent in the face of declining legal volumes in 2015 versus the previous year. This was mainly a consequence of the unprecedented November 2015 high excise increase. As a result, the financial performance of the business translated into a reduction of revenue of 4.5 percent and gross profit of 2.2 percent in the financial year 2015.
Stefano Clini, Managing Director, British American Tobacco Malaysia said, “The operating environment last year was far tougher in terms of business challenges in comparison to previous years. Amidst the backdrop of tumultuous economic conditions coupled with three consecutive high tax increases since 2013, including the highest ever excise increase of close to 40 percent in November 2015, the illegal cigarette trade escalated drastically. Consequently, the legal volumes last year plummeted and we continued to suffer”.
The recent Illicit Cigarette Study (ICS) conducted by Nielsen revealed that the illegal cigarette trade has reached a record high of 45.6 percent as of December 2015. Currently, about 1 out of 2 cigarette packs sold in the market is illegal.
In terms of operating expenses, it was 8.7 percent lower when compared to 2014, largely attributed to the Group’s continuous efforts in driving further efficiencies in its expenditure and overhead costs. The lower operating expenses in 2015 also contributed substantially to a marginal increase of 0.5 percent in profit from operations.
As a result, BAT Malaysia managed to record a 0.9 percent increase in its net profits to RM910 million and a 1.0 percent increase in profits before tax for the financial year 2015.
BAT Malaysia also strengthened its market leadership by an increase of 0.9 percentage point, achieving 62.1 percent of market share in 2015. This growth was mainly driven by the PETER STUYVESANT brand within the Aspirational Premium segment. The Group’s flagship brand, DUNHILL, also recorded its highest market share of 47.9 percent in October 2015.
Arising from the Group’s financial performance, BAT Malaysia declared a fourth interim dividend of 78 sen per share, making the total net dividend pay-out for the financial year to be 312 sen per year, which yields a dividend growth of 1.0 percent over 2014.
Given the circumstances, it was a commendable performance for the Group in 2015.
On industry outlook for 2016, Clini said that the share of illegal cigarettes will grow rapidly, further impacting the legal industry volume, in the event of further tax increases and if more urgent and drastic efforts to address the illegal segment are not taken. He added that the future of the industry will continue to be largely dependent on a prudent excise policy and efforts to reduce the illegal cigarette trade.
“Our priorities and game plan for 2016 will remain the same which is to invest where it matters to strengthen our portfolio and build a sustainable business model within a more demanding operating environment to deliver shareholder value”, Clini concluded.
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. Its brand portfolio includes well-established international names like DUNHILL, KENT, PALL MALL and PETER STUYVESANT. British American Tobacco Malaysia has about 752 employees who are involved in the full spectrum of the tobacco industry, from processing to manufacturing, and marketing to 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:
Fairuz Helmi, Head of Corporate and Regulatory Affairs at 03-7491 7268 or Fairuz_Helmi@bat.com