BAT's Q3 earnings hit by lower sales volumes

PETALING JAYA: British American Tobacco (Malaysia) Bhd’s (BAT Malaysia) net profit for the third quarter ended Sept 30, 2017 fell 32.66% to RM143.18 million from RM212.62 million a year ago due to lower sales volumes.
In a filing with Bursa Malaysia today, BAT said the lower volumes were due to a decline in market share in the legal market of 0.6% to 53.9%, mainly driven by a decline in Dunhill’s market share, registering a total share in the legal market of 38.4%.
The decline in market share is a result of new illegal cigarette dynamics, namely legally perceived brands with fake tax stamps, introduced by certain local players and new entries in the legal low price segment.
The lower volumes led to a lower gross profit of RM276.11 million during the quarter compared with RM323.17 million a year ago while revenue fell 18.76% to RM757.28 million from RM932.19 million a year ago.
Operating expenses were higher during the quarter at RM85 million compared with RM75.41 million a year ago due to the pre-spend on marketing investment committed behind Rothmans, which was launched in the first week of October 2017.
The group also recorded restructuring expenses of RM2 million during the quarter, comprising on-going cost of the project and outplacement programmes. As a result, profit from operations was lower at RM189.49 million compared with RM248.3 million a year ago.