KUALA LUMPUR: British American Tobacco (M) Bhd's earnings continued to be hampered by high illicit cigarette volume, growth of illicit vaping, market downtrading and lower duty-free sales.
BAT Malaysia managing director Jonathan Reed said while the tobacco black market continued to undermine the company's performance, the government has made a good start in addressing the tobacco black market in Budget 2021.
"There is now an urgent need to close the price gap between legal and black market products. Only then can the illegal cigarettes problem be addressed effectively and tax losses can be stemmed.
"Further, it is critical that the Malaysian government introduces regulatory and excise frameworks for nicotine vaping.
"This would ensure that the one million Malaysian vapers can access products of known quality, allow the government to collect significant revenue and is part of our global purpose of creating A Better Tomorrow by reducing the health impact of our business," he said in a statement today.
BAT Malaysia net profit eased 30 per cent to RM345.69 million during the full financial year ended December 31, 2020 (FY20) from RM345.69 million registered a year earlier.
The group said the decline was partially offset by the benefit of cost rationalisation that the group has undertaken since the end of 2019.
Revenue in the same period shrank 7.69 per cent to RM2.32 billion from RM2.51 billion recorded in FY19.
For the fourth quarter (Q4), BAT Malaysia's net profit decreased 25.57 per cent to RMM72.72 million from RM97.7 million, while revenue was 0.3 per cent lower at RM660.23 million from RM662.45 million.
Reed further said the group proved to be resilient in 2020, with strong signs of improved quarter on quarter performance.
"Based on our Q4 results, we successfully delivered three consecutive quarters of growth in profit from operations.
"Notably, BAT Malaysia was able to outperform the legal industry with a growth of three per cent over the previous quarter.
"This was mainly due to the market leadership of Dunhill coupled with the strong performance of our value for money (VFM) brands Rothmans and KYO.
"The improved performance was able to offset the impact of Covid-19 travel restrictions on the company's duty-free business," he said.
Reed said BAT Malaysia's success in growing its market share within the legal space saw its profit from operations for the quarter increase by 19 per cent to RM104 million.
"This improvement came off the back of a five per cent jump in revenue to RM660 million compared to the Q3," he said.