BAT 4Q net profit declines 2% y-o-y to RM185.5 mil

by **Cals** Mon 16 Feb 2015, 19:45

BAT 4Q net profit declines 2% y-o-y to RM185.5 mil

By Ahmad Naqib Idris / theedgemarkets.com | February 16, 2015 : 6:51 PM MYT

KUALA LUMPUR (Feb 16): [size=14]British American Tobacco (Malaysia) Bhd (BAT) ([You must be registered and logged in to see this image.] Financial Dashboard) posted a net profit of RM185.5 million for the fourth financial quarter ended Dec 31, 2014 (4QFY14), down a marginal 2% from RM189.9 million in the previous year's corresponding quarter.

This was despite a 10% year-on-year (y-o-y) increase in revenue to RM1.21 billion from RM1.09 billion.

The group has also declared a fourth interim dividend of 78 sen per share for FY14, which amounts to RM222.71 million payable on March 26 this year, for all shareholders whose names appear on the record of depositors on March 3, it told Bursa Malaysia in a filing today.

Meanwhile, for the full FY14, BAT's (fundamental: 1.35; valuation: 1.30) net profit rose 9% to RM898.1 million, from RM825.8 million in the year before, while revenue climbed 6% y-o-y to RM4.80 billion from RM4.52 billion.

The group said its market share for the year fell 0.7 percentage point (ppt) y-o-y to 61.2%, due to down trading in the market and weaker performance from its Pall Mall and non-supported brands.

Its premium portfolio was also pressured further due to the excise-led price increase in November, which saw BAT raising its prices by RM1.50 per pack for its premium cigarettes.

"In summary, the group's focus brands, namely, Dunhill, Peter Stuyvesant and Pall Mall, have shown a resilient performance considering the challenging environment in 2014, with only a 0.2ppt loss versus same period last year.

"The bigger part of the corporate share decline y-o-y (0.5ppt) came from non-supported brands in the portfolio," it said.

Besides the lower market share, BAT also highlighted that its operating expenses rose 20.9% y-o-y in FY14, due to an increase in investment on brand activation programmes and trade retail contracts.

The group also cited a one-off cost related to the discontinuation of cigarette rations to employees and inflation as factors behind the higher costs for the year.

Looking ahead, BAT remains cautiously optimistic on its prospects for 2015, amid the implementation of the goods and services tax in April and the declining market share of illegal cigarettes.

"The group is very encouraged by the robust ongoing retail enforcement actions taken by Royal Malaysian Customs in addressing the illegal cigarettes trade that started in the first quarter of 2014.

"These enforcement actions have proven to be effective and instrumental in driving a sharp 6.6 ppt reduction of the share of illegal cigarettes trade from 3.8% in 4Q13 to 32.3%, as recorded in the last reading in 2014," said the group.

However, BAT said the legal cigarette industry is still impacted by the illegal cigarette trade, due to the steep excise hikes in September 2013 and November 2014.

BAT rose RM1.44 or 2.1% to close at RM70.60, translating to a RM19.75 billion in market capitalisation.

[size=12](Note: The Edge Research's fundamental score reflects a company's profitability and balance sheet strength, calculated based on historical numbers. The valuation score determines if a stock is attractively valued or not, also based on historical numbers. A score of 3 suggests strong fundamentals and attractive valuations.)[/size]
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