PETALING JAYA: British American Tobacco (Malaysia) Bhd’s (BAT Malaysia) net profit for the third quarter ended Sept 30, 2018 grew marginally to RM145.81 million from RM145.49 million a year ago.
The group said in a statement that it saw volume recovery at 4.8% during the quarter versus the first quarter of 2018 while profit from operations grew 26.5% due to stable volumes and one-off benefit from the tax holiday of Goods and Services Tax (GST) from June till August.
Revenue for the quarter rose marginally to RM735.53 million from RM734.61 million a year ago.
The group declared a third interim dividend of 40 sen per share amounting to RM114.21 million, payable on Nov 16, 2018.
For the nine months ended Sept 30, 2018, BAT’s net profit fell 14.44% to RM352.17 million from RM411.60 million a year ago while revenue fell 8.02% to RM2.05 billion from RM2.23 billion a year ago.
The group said volumes, revenue and profit from operations during the period fell as total industry legal volumes declined 3.8% from a year ago, primarily due to high illegal cigarette trading.
“The group’s volume performance was also impacted and registered a decline of 5.8% versus same period of last year. The group’s performance was impacted mainly by the reduction of the legal market, alongside with downtrading and the strain of cash outlay challenges in small volume outlets with limited working capital capacity,” it said.
BAT Malaysia managing director Erik Stoel said it is concerned with the development on Sales and Services Tax (SST) pricing, as it has not been given clear guidance on the minimum quantum that needs to be passed on.
“We have met with the bureaucrats of the Health Ministry who have indicated an expectation of a price increase of about RM1, ignoring the fact that SST is a replacement of GST. It is also inconsistent with the recent statement by the Health Minister that the ministry is looking at determining the recommended ceiling price to equalise and control cigarette prices across the board,” he said.
He said setting such a price increase will spark a fresh push towards illegal cigarettes, which will aggravate the high incidence of illegal trade and stressed that the increase in price should include the incremental difference between the SST rate and the GST rate.
Meanwhile, he lauded the Royal Malaysian Police’s recent crackdown on a major syndicate’s supply chain network and the Royal Malaysian Customs’ amendments to the Customs Act to include more deterrent penalties for the sale of illegal cigarettes and liquor.
“Whilst our results in the third quarter of 2018 is encouraging, our outlook remains dependent on the progress of the fight against illegal cigarettes and recovery of legal market as well as the resolution to SST pricing issue,” said Stoel.
On Friday, the stock was the top loser on the bourse, falling 4.7% or RM1.58 to close at RM32.02 with 744,300 shares traded.