KUALA LUMPUR: British American Tobacco (Malaysia) Bhd (BAT) posted a lower net profit of RM77.2 million in the second quarter ended June 2019 compared with RM113.7 million due to soft tobacco market.
Despite external pressures, the second quarter saw BAT outperforming the legal industry, marking a 3.6 per cent growth versus the preceding quarter. This translated to revenue growth of 3.2 per cent.
However, consequent to the overall decline in legal volumes, operating expenses increased by 19.5 per cent.
BAT said, quoting Illicit Cigarettes Study, the illegal cigarette trade remains high, holding at 60 per cent. This put pressure on legal industry volume.
It said total legal industry volume had declined by eight per cent when compared with the same period of the previous year, largely due to sales and service led pricing and high illegal cigarette incidences.
The growth of quasi legal cigarettes with fake tax stamps and other illegal products in the market were putting additional pressure on the legal industry volume, it added.
Managing director Erik Stoel said the results of the last quarter were a reflection of the escalated efforts management had undertaken to defend its position vigorously, preserve long-term shareholder value and fight against a dynamic marketplace under siege from continued high levels of contraband cigarettes.
“If the industry continues to be pressured without any meaningful interventions, we will have to review the level of our investment in Malaysia," he said.
The company said it registered a market share of 54.8 per cent in the second quarter of 2019, indicating a stabilisation mainly driven by the strong performance of Rothmans in the value-for-money segment.
"Rothmans continues its growth trend, registering an increase of 0.6ppt versus the previous quarter," it said.
This indicates a trend of downtrading from premium and aspirational premium to value for money segment, it added.
BAT said its premium brand Dunhill remained stable despite a slight impact to market share by 0.3 ppt when compared to the first quarter of 2019 due to affordability stretch on consumers remaining a key challenge.