Black market still weighing down BAT Malaysia’s performance

PETALING JAYA: British American Tobacco (Malaysia) Bhd’s (BAT Malaysia) net profit for the second quarter ended June 30 (Q2’20) fell 28.4% to RM54.61 million from RM76.27 million a year ago, while revenue was 14.7% lower at RM546.59 million compared with RM640.81 million in the previous year’s same quarter.

Compared with the preceding quarter, the company’s domestic volume saw an increase of 15% in Q2’20 over Q1’20 due to BAT Malaysia’s response to fully replenish the market within the first week of restart of operations following the movement control order (MCO).

The company also refocused its distribution to organised convenience stores as most restaurants and cafes were closed during the MCO. As a result, there was a 1.9 percentage point increase in share of market in convenience stores versus the preceding quarter.

The overall domestic volume improvement translated to revenue increase of 14% in Q2’20, which resulted in a 16% rise in profit from operations to RM83 million against RM71 million registered for the immediate preceding quarter.

Despite the difficult operating landscape, the board of directors declared a second interim dividend of 18 sen per share, totalling RM51 million to be paid out on Aug 19, 2020.

BAT Malaysia managing director Jonathan Reed said its Q2 performance came on the back of its ability to re-supply the market quickly following the MCO as well as its growth in market share, driven by its focus on the organised convenience channel.

“However, tackling the tobacco black market and illegal vaping remains to be the biggest issue for the sustainability of the legal tobacco industry. BAT Malaysia has taken the proactive step to address the illegal tobacco trade through the launch of our Stop the Black Market campaign on July 6, 2020,” Reed said in a statement.

For the six month period, BAT Malaysia’s net profit dropped 36.1% to RM105.38 million from RM164.87 million a year ago, mainly attributed to legal market contraction as a result of illicit cigarette volume and illicit nicotine vaping growth, market downtrading and lower duty-free sales as a result of the regional and international travel restrictions due to Covid-19 pandemic and the MCO.

Its revenue decreased 18.5% year-on-year to RM1.03 billion from RM1.26 billion. Looking ahead, the group said its future growth will be very much dependent on the recovery of the legal cigarette market, a regulated nicotine landscape, sensible fiscal policies and a resolution to the affordability issues affecting consumers.

“Given the economic slowdown coupled with the expected subsidies and loan moratorium removal later in the year, consumer affordability will be further stretched. Taking this into account, the group has launched the new “KYO” brand extending our portfolio in the value for money segment to capture fair share of down traders,” it said.

source https://www.thesundaily.my/business/black-market-still-weighing-down-bat-malaysia-s-performance-DE3116270