BAT has no plan to increase cigarette prices presently

Stoel: ‘We will not hike the price of cigarettes, but should the government impose another excise duty hike, then we will review this.’

KUALA LUMPUR: Malaysia’s leading tobacco player British American Tobacco (M) Bhd (BAT) has stressed that it has no plan to increase its cigarette prices for now.

With the challenging economic landscape still prevalent, managing director Eric Stoel said the government’s move to freeze further excise duty hikes this year was pertinent to assist in stabilising the tobacco industry and reducing contraband cigarettes in the market.

Stoel commended Second Finance Minister Datuk Johari Abdul Ghani for his statement in an April report that the government had no plan to increase the excise duty for cigarettes at the moment.

In a separate report, Johari had said that illicit cigarettes have been on the rise after the government raised cigarette prices in the form of higher excise duties.

The minister said the higher excise duties that resulted in most cigarettes costing RM17 per pack, was meant to discourage people from smoking.

“Any excise duty hike now will not help in stabilising the tobacco industry, nor will it help reduce the illicit trade.

“We will not hike the price of cigarettes, but should the government impose another excise duty hike, then we will review this,” Stoel said after BAT’s 56th AGM yesterday.

BAT was among tobacco players here which took a hit after a 36% excise duty hike on Nov 3, 2015.

Prior to that, the industry had faced a 12% hike in excise duty on Nov 1, 2014 followed by the implementation of the goods and services tax in April 2015.

This had resulted in a 13% to 25% increase in prices of BAT’s cigarettes.

Among its portfolio of brands, Dunhill, which costs RM17 per pack, has the highest market share as a premium brand at 42.2%, followed by Peter Stuyvesant at 6.5% and Pall Mall with a rather flat market share of 4.3%.

With extreme excise duty hikes in two consecutive years, BAT’s net profit declined from RM913mil in financial year 2015 (FY15) to RM732mil in FY16, mainly due to volume contraction and higher excise duties.

BAT’s market share shrank to 57.1% as at December 2016 from 60.9% in 2015.

Stoel said BAT was still in the midst of winding down the group’s factory operations and expects to conclude the exercise by the second half of this year.

“We will be moving to the new headquarters at Wisma Guocoland in Bukit Damansara hopefully by August this year. We will see another batch of 80 employees from the manufacturing line leaving us,” said Stoel.

The group recorded a restructuring income of RM132mil, a gain from disposal of the land and building where its manufacturing facility is located in Petaling Jaya, the provision for employee redundancy-related costs and impairment of assets, among others.

The steep excise duty hike had also impacted BAT’s contract manufacturing business, which saw a 46.2% decline. This has ceased operations since Dec 31, 2016, said Stoel.

“The focus this year will be on finding ways to reduce the illicit trade and not increasing the price of our cigarettes because this will not help stabilise the tobacco industry in anyway.

“We will also focus on growing our market share and volume growth,” he said, adding that the company was also in the midst of innovating new products to grasp market share.

With BAT’s longstanding legacy and presence in Malaysia, Stoel said the company had in place a clear strategy and commitment to invest in Malaysia despite the challenging environment.

“I don’t think we are ever going to exit Malaysia. We are here for the long term,” Stoel said.

BAT shares closed up 42 sen or 0.89% to RM47.42 yesterday, arriving at a market value of RM13.5bil.

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