KUALA LUMPUR: British American Tobacco (Malaysia) Bhd's (BAT Malaysia) net profit dropped 42.8 per cent to RM50.77 million in the first quarter (Q1) ended March 31, 2020 from RM88.6 million recorded in the same quarter last year.
Its revenue eased 22.5 per cent to RM481.15 million from RM620.96 million.
In a statement today, BAT Malaysia said total legal industry volume had declined 11 per cent against the same period last year as persistently high levels of illegal cigarette sales and illicit nicotine vaping products continued to impact the legal tobacco market.
It said despite the decline, the industry had remained resilient through the Covid-19 disruptions with the exception of the duty free business (four per cent of group revenue) where sales had oceased as a result of border closures and travel restrictions.
It said the combination of legal market contraction and downtrading was further compounded by impact on duty free sales due to Covid-19.
This led to a decline of 21 per cent in the group's volume and a decline of 22.5 per cent in the group's revenue of RM481 million compared to the same period last year.
BAT Malaysia managing director Jonathan Reed said the group's Q1 financial results were within expectations despite the disruption from the Movement Control Order (MCO) in the last two weeks of Q1.
"However, due to the supply disruptions of legitimate tobacco manufacturers during the MCO period, consumers were forced to turn to cheap, black market cigarettes.
"As a result, it has been highly disappointing to see a severe uptick in illegal cigarette activities," he said.
Reed said the government is losing RM 5.1 billion in tax revenue to the tobacco black market at a time when the country needs every ringgit for the COVID19 fight and the subsequent recovery.
He said it is alarming that at a time when movement controls were at their strictest and the legal business had distribution disruptions – the criminal syndicates were able to establish a virtual monopoly by brazenly flouting MCO orders and profiteer from a national health and economic crisis
"Now, more than ever, there must be focus given over to ensure that effective structural reforms are put in place to tackle this problem once and for all.
"The sustainability of the industry and livelihoods of our employees will be very much dependent on tackling the tobacco black market scourge, a regulated nicotine landscape and sensible fiscal policies," he said.
BAT Malaysia has has declared a first interim dividend of 17.0 sen per share.