BAT's 1Q earnings up 7.65%, driven by Nov price increase

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KUALA LUMPUR (Apr 28): British American Tobacco (Malaysia) Bhd (BAT) recorded a net profit of RM241.74 million or 85.2 sen per share in the three months ended March 31, 2015 (1QFY15), up 7.65% on-year from RM224.56 million or 78.9 sen per share, driven by the November 2014 excise-led price increase.

BAT (fundamental: 1.35; valuation: 1.7), in its filing to Bursa Malaysia today, said its revenue was up 10.4% to RM1.274 billion, compared to RM1.154 billion a year ago.

It has also declared a first interim dividend of 78 sen per share, which amounts to RM222.71 million in total, payable on May 28.

Its market share for the quarter, it said, stayed largely flat at 61.1% (down just 0.1 percentage point from the full 2014), and “represents a commendable share performance, despite the price increase in the fourth quarter of 2014,” it said.

During the quarter, its domestic and duty free volumes marginally declined 0.4%, when compared with 1QFY14, it said.

Contract manufacturing volumes, meanwhile, declined 4.8% on-year, largely due to declining volumes sold to the Australian market.

BAT said its operating expenses in 1Q15 were 22.5% (RM23 million) higher than 1Q14, driven mainly by timing of marketing expenditure, one-off business restructuring costs, and to a lesser extent, by the impact of inflation on the overall cost structure.

On prospects, BAT said it is continuously monitoring the impact the economic situation within and outside Malaysia, may have on consumer disposable incomes.

“Illegal cigarette trade in Malaysia remains a key challenge in 2015, for the legal tobacco industry. Legal volumes continue to suffer from the impact of the illegal cigarette trade, as a consequence of the steep excise increases in September 2013 and November 2014.”

However, BAT said it “is very encouraged” by the relentless enforcement efforts taken by Royal Malaysian Customs in 2014, in addressing the illegal cigarettes trade.

BAT said its remains cautiously optimistic for the 2015. Its shares closed 60 sen or 0.9% lower at RM65.94 million today, with a market capitalisation of RM18.83 billion.
(Note: The Edge Research's fundamental score reflects a company’s profitability and balance sheet strength, calculated based on historical numbers. The valuation score determines if a stock is attractively valued or not, also based on historical numbers. A score of 3 suggests strong fundamentals and attractive valuations.)