BRITISH American Tobacco (M) Bhd (BAT) saw its net profit for 1Q FY2023 ended March 31, 2023 slumped 22.9% to RM40.32 mil (1Q FY2022: RM52.29 mil) while its revenue dipped 25.2% to RM390.22 mil (1Q FY2022: RM521.56 mil) due to lower sales volume driven by an increase in vapour usage as well as the persistent tobacco black market.
Nevertheless, the only listed tobacco player on Bursa Malaysia noted that rigorous cost rationalisation efforts to mitigate higher inflationary pressures on its cost of doing business mitigated the impact of the lower volume although its profit from operations during the period under review dwindled to RM59 mil from RM82 mil in the same period last year.
Factoring its financial performance, the board of directors declared a first interim dividend of 13 sen/share (1Q FY2022: 17 sen/share) amounting to RM37.1 mil payable on June 26 to shareholders.
“Despite the economic headwinds, we are optimistic for the company’s prospects for 2023. BAT Malaysia is maintaining the growth trajectory of its strategic brands within its premium, aspirational premium and value-for-money (VFM) segments,” commented its managing director Nedal Salem.
“This is in tandem with the company’s aim to deliver combustible value growth to support its multi-category portfolio of reduced-risk products. It is also in line with our commitment towards building A Better Tomorrow.”
Towards this end, BAT Malaysia aims to continue growing its tobacco heating product, glo, which represents its efforts to offer a choice of reduced-risk alternatives to adult smokers. “We will also focus on investing in our VFM brands and maintaining leadership in the premium segment,” noted Salem.
During its recent annual general meeting (AGM), the Group has disclosed that it expects the volatile economic environment to continue impacting its financial performance in the short-term.
“We expect this challenging operating landscape to stretch disposable income, leading to down-trading from legal products to tobacco black market options,” projected Salem.
“Nevertheless, in the medium-term, we are confident that economic conditions will improve while the Government looks at introducing balanced regulations on vapour and accelerating their interventions to reduce the tobacco black market.”
He added: “We are also buoyed by the Government’s move to exempt nicotine vapour from the Poison Act 1952 and introduce excise onto nicotine vapour which signals the intent to establish regulations for vapour products. The group continues to urge the government to establish a balanced science and evidence-based regulatory framework for vapour products.”
Above all else, Salem also stressed the need to continue working with policymakers in the fight against the tobacco black market.
“With the incidence of black market cigarettes continuing to hover above 55%, we remain firm that this issue is detrimental not only to public health but also has a significant adverse impact on the country’s economy,” he added.
At the close of today’s trading, BAT Malaysia was unchanged at RM10.82 with 82,800 shares traded, this valuing the company at RM3.09 bil. – May 29, 2023
