KUALA LUMPUR (July 23): British American Tobacco (M) Bhd (BAT) reported a 28.39% fall in second quarter net profit to RM54.61 million from RM76.27 million a year earlier, due to lower sales.
Earnings per share for the quarter ended June 30, 2020 fell to 19.1 sen from 26.7 sen, the group said in a filing with Bursa Malaysia.
Revenue stood at RM546.59 million, down 14.7% from RM640.81 million previously.
BAT said domestic volume saw an increase of 15% over the preceding quarter due to the group’s fast and agile response to fully replenish the market within the first week of restart of operations following the Movement Control Order (MCO).
The group said that despite the difficult operating landscape, it has declared a second interim dividend of 18 sen per share, totaling RM51 million, to be paid out on Aug 19.
BAT managing director Jonathan Reed, in a separate statement, said the group delivered a strong performance despite the challenges brought about by the COVID-19 pandemic.
“Our strong second quarter performance came on the back of our ability to resupply the market quickly following the Movement Control Order as well as our growth in market share, driven by our focus on the organised convenience channel,” he said.
For the six months ended June 30, 2020, BAT’s net profit fell 36.08% to RM105.38 million from RM164.87 million. Revenue dropped 18.55% to RM1.03 billion from RM1.27 billion.
BAT said the decline in profit was mainly due to legal market contraction as a result of illegal cigarette volume and illegal nicotine vaping growth, market downtrading and lower duty-free sales as a result of COVID-19 travel restrictions.
The group said total legal industry volume declined 6% during the six months compared with the same period of last year, and black market volume continues to be at 69% of the total nicotine market with growth driven by illicit vaping.
“The results from enforcement actions though improved were insufficient to drive a recovery in legal cigarette volumes.
“This (decline in sales) was partially offset by the benefit of cost rationalisation that the group has undertaken.” BAT said.
Reed said tackling the tobacco black market and illegal vaping remains the biggest issue for the sustainability of the legal tobacco industry, adding that the company has taken proactive steps to address illegal tobacco trade by launching a campaign on July 6.
BAT shares closed six sen or 0.57% lower at RM10.38 today, valuing the cigarette manufacturer at RM2.96 billion. Around 466,600 shares were traded today.
Year to date, the counter has fallen 31.17% from RM15.08.