PETALING JAYA: British American Tobacco (M) Bhd (BAT) recorded slightly lower net earnings for the nine-month period ended Sept 30, 2011 at RM538.97 million, down by RM9.42 million from RM548.39 million during the same period last year. Revenue, however, increased to RM3.14 billion from RM3 billion last year.
According to the announcement posted on Bursa Malaysia’s website yesterday, the lower profit is believed to be due to its higher cost of sales of RM2.02 billion or 64.5% of its revenue, up from RM1.87 billion or 62.1% of the group’s total revenue during the corresponding period last year. Profit margin was lower during the period at 17.2% from 18.2% previously.
Gross profit decreased by 2% during 9MFY11 to RM1.12 billion from RM1.14 billion recorded during the same period last year. This decline was attributed to the lower volume and loss of margin from the 14-stick pack, partially offset by higher net pricing and increased contract manufacturing volumes. Operating expenses were lower at RM376.3 million from RM395.4 million previously.
“During the period, the group changed its distribution model from company-owned distribution to exclusive third party distributorships for three of its biggest areas; the Klang Valley, Penang and Johor Bahru. This decision resulted in organisational restructuring which includes a voluntary separation scheme (VSS) and reorganisation of certain employees.
The financial impact of RM12 million as a result of this organisational restructuring has been recognised in 3Q11,” BAT stated.
The group has managed to increase its market share to 60.6% of the total cigarette market up to August this year, which is an increase of 0.6% compared with the same period last year.
In August alone, the group’s market share stood at 62% of the total cigarette market, up from 58.7% in January 2011, due to stronger enforcement by the authorities to curb sub-value for money cigarettes selling at lower than the government mandated minimum price.
“Dunhill, the largest cigarette brand in the market, supported by the launch of its capsule products, was the key driver behind the group’s performance, growing by 0.8 percentage points compared with the same period last year to register a market share of 44.1% for year-to-date August 2011,” the group stated.
Despite the lower net earnings in 9MFY11, the group said its profit outlook for 2011 has improved against the previous quarter as no excise duty hike was announced at the tabling of Budget 2012. Analysts initially expected the government to increase the duty for cigarettes and other tobacco products next year, in order to reduce its fiscal deficit.
“However, the prevailing high incidence of illicit cigarette trade and pricing activities of certain sub-value for money brands selling below the government mandated minimum price remain a concern. The support of the government in addressing this concern is vital,” BAT said.
Earnings per share decreased to RM1.89 per share from RM1.92 during the corresponding period last year. However, the board of directors has declared a third interim dividend of 60 sen per share, tax exempt under the single-tier tax system, amounting to RM171.3 million in respect of FY11 ending Dec 31. For 9MFY11, total dividends proposed/declared amounted to RM2.10 per share compared with RM1.77 previously.
BAT’s share price closed flat yesterday from Tuesday’s closing price of RM43.60. It has lost some 4.17% of its value since Jan 3, 2011 when it was traded at RM45.49. It touched its
year-to-date low at RM42.98 on Sept 23, and has since increased by 1.44% to yesterday’s closing price.
This article appeared in The Edge Financial Daily, October 21, 2011.
According to the announcement posted on Bursa Malaysia’s website yesterday, the lower profit is believed to be due to its higher cost of sales of RM2.02 billion or 64.5% of its revenue, up from RM1.87 billion or 62.1% of the group’s total revenue during the corresponding period last year. Profit margin was lower during the period at 17.2% from 18.2% previously.
Gross profit decreased by 2% during 9MFY11 to RM1.12 billion from RM1.14 billion recorded during the same period last year. This decline was attributed to the lower volume and loss of margin from the 14-stick pack, partially offset by higher net pricing and increased contract manufacturing volumes. Operating expenses were lower at RM376.3 million from RM395.4 million previously.
“During the period, the group changed its distribution model from company-owned distribution to exclusive third party distributorships for three of its biggest areas; the Klang Valley, Penang and Johor Bahru. This decision resulted in organisational restructuring which includes a voluntary separation scheme (VSS) and reorganisation of certain employees.
The financial impact of RM12 million as a result of this organisational restructuring has been recognised in 3Q11,” BAT stated.
The group has managed to increase its market share to 60.6% of the total cigarette market up to August this year, which is an increase of 0.6% compared with the same period last year.
In August alone, the group’s market share stood at 62% of the total cigarette market, up from 58.7% in January 2011, due to stronger enforcement by the authorities to curb sub-value for money cigarettes selling at lower than the government mandated minimum price.
“Dunhill, the largest cigarette brand in the market, supported by the launch of its capsule products, was the key driver behind the group’s performance, growing by 0.8 percentage points compared with the same period last year to register a market share of 44.1% for year-to-date August 2011,” the group stated.
Despite the lower net earnings in 9MFY11, the group said its profit outlook for 2011 has improved against the previous quarter as no excise duty hike was announced at the tabling of Budget 2012. Analysts initially expected the government to increase the duty for cigarettes and other tobacco products next year, in order to reduce its fiscal deficit.
“However, the prevailing high incidence of illicit cigarette trade and pricing activities of certain sub-value for money brands selling below the government mandated minimum price remain a concern. The support of the government in addressing this concern is vital,” BAT said.
Earnings per share decreased to RM1.89 per share from RM1.92 during the corresponding period last year. However, the board of directors has declared a third interim dividend of 60 sen per share, tax exempt under the single-tier tax system, amounting to RM171.3 million in respect of FY11 ending Dec 31. For 9MFY11, total dividends proposed/declared amounted to RM2.10 per share compared with RM1.77 previously.
BAT’s share price closed flat yesterday from Tuesday’s closing price of RM43.60. It has lost some 4.17% of its value since Jan 3, 2011 when it was traded at RM45.49. It touched its
year-to-date low at RM42.98 on Sept 23, and has since increased by 1.44% to yesterday’s closing price.
This article appeared in The Edge Financial Daily, October 21, 2011.
