BAT recovery riding on legal market


The illicit cigarette trade continues to eat into British American Tobacco (M) Bhd’s (BAT) earnings, with recovery for the industry largely de- pending on the recovery of the legal market.

For the second-quarter ended June 30 this year (2Q17), the tobacco manufacturer and marketeer saw its revenue slip 19.6% to RM774.09 million compared to the RM962.57 million that was reported in the previous year’s corresponding period.

The company, which is part of the second-largest stock market listed tobacco groups by global market share, announced in an exchange filing yesterday that the lower turnover was due to the 16.9% decline of domestic volumes and cessation of export volumes as planned under its business transformation incurred in the first- half of this year.

Over the same period, illegal cigarettes incidence rose to 57.9% from 50%, which is spurred by the price gap between legal and illegal cigarettes, coupled with weakened consumer spending power.

The tobacco company’s fiscal performance was also affected by overhead savings from cost base transformation initiatives, lower recharges from related entities, rental income from the sub-lease of the under-utilised space currently tenanted by the group and timing of spends.

However, on a quarter-on- quarter (QoQ) basis, BAT’s domestic volumes increased by 6.2% in 2Q17, due to the recovery of market share for the quarter and slight fall in illegal cigarette incidence from 58.9% to 57.9% over the same period.

The group grew its market share from 53.5% in 1Q17 to 54.5% in 2Q17, while Dunhill, the biggest premium brand in the legal market, had its share increased by 1.4% to 38.8% over the same period.

BAT MD Erik Stoel said the increase was mainly driven by the launch of Dunhill’s new line extension, while Peter Stuyvesant and Pall Mall recorded a total market share of 11.8% and maintained its leadership in the aspirational premium brand segment for the fourth consecutive month.

“This achievement was largely attributed to Peter Stuyvesant’s solid growth trajectory with a 7.6% share of market as of May 2017, holding steadily since 1Q17.

“On a QoQ basis this year, it is encouraging to note that the group’s volumes, share and operating profit have seen a recovery trend,” Stoel said in a statement yesterday.

BAT declared a second interim tax-exempt dividend of 43 sen per share, amounting to a total payout of RM122.78 million for the ongoing financial year (FY17).

The dividend — payable on Aug 23 this year — is two sen lower than the second interim dividend declared in FY16.


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