Shut down of cigarette plant to affect 230 employees
PETALING JAYA: British American Tobacco (M) Bhd (BAT), the country’s biggest cigarette maker, is winding down it manufacturing business in stages with the shut down of its facility in Petaling Jaya expected in the second half of 2017.
The company said 230 employees would be affected. The land where the facility is located will be disposed of by way of a public tender exercise.
The maker of Dunhill, Peter Stuyvesant and Pall Mall told Bursa Malaysia yesterday that it would be sourcing tobacco products for the domestic market from other BAT group factories regionally.
“This increasingly challenging environment requires the company to restructure and transform its business which apart from the winding down of factory operations include the sharpening of its commercial capabilities whilst optimising the supply chain and transactional activities to ensure that BAT remains a competitive consumer-focused market leader,” it said.
BAT said the restructuring was in line with the company’s efforts towards realising a new and more sustainable business model, amid an increasingly challenging business environment.
“The high excise environment has ultimately led to the sharp rise in illegal cigarettes and significantly lower legal sales, resulting in rising cigarette production costs,” it explained.
While BAT did not elaborate on costs or proceeds to be gain from the disposal, it expected the restructuring to have a positive financial impact on the BAT Group.
It said the affected employees would be given a benefit-package as well as the option to undergo a career-transition programme.
In 2015, BAT said its sales volume decline 13.5% from 2014, causing its revenue to fall by 4.5% year-on-year to RM4.58bil from RM4.79bil previously.
However, its profit for the year grew 1.7% to RM913.31mil from RM898.13mil in 2014, with earnings per share increasing to RM3.19 from RM3.16 previously, despite registering a significant volume loss due to lower operating expenses and gains from the disposal of assets related to the local leaf operation being discontinued in 2013.
BAT said it would not need shareholders’ approval for the winding down of the factory, but the disposal of the land where the facility is located is subject to approval.
“The company will make further announcements and issue a circular to shareholders in relation to the proposed disposal of the land in due course,” it said.
BAT said an independent real estate agent had been appointed to deal with all matters relating to the proposed land sale.
Shares in BAT yesterday closed 28 sen higher to RM55.32 with 5.56 million shares traded.