KUALA LUMPUR: British American Tobacco (Malaysia) Bhd’s (BAT) net profit in the third-quarter (Q3) ended September 30, 2019 shrank 42.02 per cent to RM84.80 million from RM146.27 million recorded a year ago.
In an exchange filing today, the tobacco company said this was due to lower cigarette volume as a result of legal market contraction and the absence of one-off factors reported in the same period last year such as the benefit from the Goods and Services Tax removal and prior year tax stamps refunds.
Its Q3 revenue reduced 20.55 per cent to RM584.34 million from RM735.53 million attributed to high levels of illegal cigarette trade incidence and impact from Sales and Services Tax led pricing as well as compounded by the rapid growth of illegal vaping.
In the first-nine months of 2019, BAT’s net profit dropped 30.60 per cent to RM246.95 million from RM355.87 million, while revenue decreased 9.76 per cent to RM1.85 billion from RM2.05 billion recorded previously.
BAT managing director Erik Stoel said the current environment within the tobacco industry was one that is unsustainable and untenable for any legal company.
“While we continue in our commitment to deliver value to our shareholders, the result for this quarter was achieved on the back of conscious cost base and investment management,” he said in a separate statement today.
He added that the current scenario of cheap illegal and contraband tobacco products had further deteriorated here despite the efforts by law enforcement agencies like the police and the Royal Malaysian Customs to clamp down on the cartels running the syndicates.
“When are we going to realise that this is an issue that goes beyond tobacco duty evasion? We need more players like the Ministry of Health (MOH) bearing down on the inflow of cheap contraband cigarettes that does not comply with tobacco control laws into the country,” he said.
Stoel said it was a known fact that illegal cigarette players did not play by any rules – they cross borders illegally, smuggle in cheap contraband cigarettes, ignore any rule or regulations like pictorial health warnings and then proceed to sell without any conscience below minimum price to anyone.
“This is a clear indicator that MOH’s biggest enemy to their public health objective is the illegal trade business. To this end, we urge MOH to focus their sights on this cheap contraband trade and collaborate with like-minded parties to manage this issue,” he said.
Stoel said Malaysia needs to come together and fight this huge issue collectively and pragmatically with all legal stakeholders.
“While there might be differing viewpoints and perspectives, we can all agree that fuelling a black economy that encourages corruption and crime will do the country no good.
“We need a sustainable total nicotine regulatory and fiscal framework in order to build our business back into growth,” he said.
He said the company remains committed to adopting a multicategory approach with investment into new category segments such as tobacco heated products, citing that Malaysia is the first market in South East Asia to launch ‘Glo’.
However, he said diversification and investment into these new categories can only be done on the basis of sensible and pragmatic total category regulation that allows legal companies to operate and set a tighter control restricting the entry of illegal cigarettes into the country.