KUALA LUMPUR (July 21): British American Tobacco (Malaysia) Bhd's (BAT Malaysia) net profit for the second quarter ended June 30, 2022 (2QFY22) increased by 2.3% to RM73.25 million, up from RM71.62 million a year ago, driven by marginally higher revenue and gross profit margin coupled with lower tax expenses.
 
Revenue in 2QFY22 grew 7% to RM637.5 million compared with RM595.8 million a year earlier.

Earnings per share (EPS) also gained to 25.7 sen per share, from 25.1 sen per share a year before.

The group declared a second interim dividend of 25 sen per share — payable on Aug 18 with an ex-date on Aug 4 — adding to a total of 42 sen for FY2022. The second interim dividend amounting to RM71.38 million represents a payout ratio of 97%.

According to BAT Malaysia’s income statement in a bourse filing on Thursday (July 21), the gross profit margin grew slightly to 26% in 2QFY22, an improvement from 25% in 2QFY21.

As for its first half of 2022 (1HFY22), BAT Malaysia recorded a decline of 6.8% in its net profit to RM125.5 million, down from RM134.7 million in 1HFY21.

In its review between 1HFY21 and 1HFY22, BAT Malaysia said that the group’s volume remained consistent due to the dip in demand during the onset of the Covid-19 Omicron variant in 1QFY22, offset by the gradual consumption recovery during the endemic phase in 2QFY22.

“The group’s revenue of RM1.16 billion (in 1HFY22) also remained steady against the same period last year of RM1.16 billion despite a contraction in the group’s total market share of 0.6 percentage points when compared with the same period last year,” BAT Malaysia said.

“Gross profit margin improved from 25.1% to 25.7% due to cost of sales optimisation despite global inflationary pressures. Profit from operations was at RM191 million year-to-date 2022 versus RM193 million in the same period last year.”

In a separate statement, BAT Malaysia managing director Nedal Salem said the company will continue its particular emphasis on tobacco harm reduction.

“We are encouraged by the government’s commitment to regulate the vape industry in Malaysia. We strongly urge the government to adopt policies that are evidence-based and data-driven, to ensure the over one million Malaysian vape users have access to reduced-risk products that are compliant with quality and safety standards,” he said.

Nedal opined that the government must continue its push towards curbing the tobacco black market in Malaysia.

“The illegal cigarette trade currently commands around 60% of the total market in Malaysia. Over the last five years, the government has already lost some RM25 billion in tax leakages to the illegal cigarette market.

“Smugglers are now being more creative in smuggling via small coastal jetties. BAT Malaysia urges the government to take effective enforcement actions to shut these channels down, whilst also addressing the affordability pressures faced by consumers,” he said.

On Thursday, BAT Malaysia’s share price closed 16 sen or 1.5% higher at RM10.52, valuing the group at RM3 billion. Year to date, the counter has fallen by 25%. It is currently trading at a historical price-earnings ratio of 10.9 times, while offering a dividend yield of about 9%.