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Price increase hurts British American Tobacco’s results

British American Tobacco (M) Bhd’s (BAT) second-quarter financial performance was hurt by the continued impact of the November 2015 excise-led price increase, as well as the reduced consumption during the fasting month.

The company remains concerned with legal volumes continuing to be impacted by the current rampant illegal cigarette trade after the unprecedented excise increase in November last year that saw consumers down-trading within the legal market.

It cited a market research done by the Confederation of Malaysian Tobacco Manufacturers last December that discovered close to one out of two packs of cigarettes sold in the country was illegal.

The company said in a press release that the total legal domestic market experienced a volume decline of 26.3% in the first half of 2016, and pursuant to that, it saw a contraction in its domestic and duty-free volumes by 28.9% versus the first half of last year.

“The overall volume reduction and its consequent escalating cost pressures resulted in a total revenue decline of 16% and gross profit of 21.5%, both when compared to the first half of 2015.

“This fall in volumes is principally driven by the steep excise increase in November 2015 and the industry has yet to see any signs of recovery,” said BAT managing director Erik Stoel in the press release accompanying the results.

The company saw its second-quarter to end June net profit declining 78.2% year-on-year (y-o-y) to RM47.72mil, while revenue also saw a y-o-y drop of 11.5% to RM962.58mil.

The company has declared a dividend of 45 sen per share, which was a decline from the 78 sen per share dividend in the same period a year ago.

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