BAT's 3Q net profit rises 6.55%, pays 78 sen dividend

by **Cals** Tue 27 Oct 2015, 23:23

BAT's 3Q net profit rises 6.55%, pays 78 sen dividend

By Tan Siew Mung / theedgemarkets.com | October 27, 2015 : 6:54 PM MYT

KUALA LUMPUR (Oct 27): [size=16]British American Tobacco (Malaysia) Bhd (BAT) ([You must be registered and logged in to see this image.] Valuation: 1.50, Fundamental: 1.35)'s net profit rose 6.55% to RM256.89 million for the third quarter ended Sept 30, 2015 (3QFY15), from RM241.10 million a year ago, largely on lower operating expenses, lower finance cost and lower cost of sales.

In a filing with Bursa Malaysia today, the group said its revenue for 3QFY15 fell 3.99% to RM1.16 billion, from RM1.21 billion in the previous year.

BAT declared a third interim dividend of 78 sen per share, amounting to RM222.71 million for the financial year ending Dec 31, 2015, payable on Nov 26.

For the nine-month period (9MFY15), net profit rose 0.13% to RM715.53 million, from RM714.59 million last year. However, revenue slipped 1.86% to RM3.52 billion from RM3.59 billion.

"Revenue decline, coupled with lower cost of sales driven by productivity savings and lower volume base, translated into a growth of gross profit of 2.8% (RM35 million) in the first nine months of 2015 versus the same period of last year," BAT said.

As of September 2015, total domestic industry volumes declined 10.9% versus the same period of last year. This is largely driven by the softer demand amongst consumers due to weaker market sentiments after the implementation of the goods and services tax.

"During this period, driven by strong market share performance, the group performed slightly better than the industry registering a volume decline of 10.0% versus last year," it said.

Contract manufacturing volumes year-to-date continued to be weak largely due to the reduction in volumes sold to Australia and South Korea, showing a decline of 22.8% when compared to 2014.

The group's operating expenses for the nine-month period were 12.2% higher than the same period last year (RM37 million). This was largely attributed to timing of brand and trade marketing expenses (RM21 million), one-off expenses associated with business restructuring mainly on the production area (RM9 million) and, to a lesser extent, the impact of inflation on the overall cost structure.

However, finance costs declined by RM5 million or 39.8% versus the same period last year due to the more flexible financing arrangement deployed following repayment of its Medium Term Notes in August last year.

As of August 2015 year-to-date, the group registered a market share of 62% (0.8ppt increase versus full year 2014) with Peter Stuyvesant, fuelling the growth within the Aspirational Premium segment (1.2ppt increase versus 2014).

Dunhill maintained its clear leadership with a share of market of 46.9%, recording a marginal decline of 0.1ppt versus full year 2014. This decline was mainly attributed to the Dunhill Full Flavour range, although partially mitigated by Dunhill Zest and Dunhill Mix share gains, which are the group's products introduced in the market in January and July this year.

Within the Aspirational Premium segment, Peter Stuyvesant continued to grow reaching a 5.5% share of market as of August 2015 year-to-date. This translated into a market share increase of 1.2ppt versus full year 2014.

Meanwhile, Peter Stuyvesant recorded its record market share of 5.7%; Pall Mall has also delivered a marginal share gain of 0.1ppt to register a share of market of 4.6% as of August 2015 year-to-date.

BAT said it expects legal cigarettes volumes to suffer after the steep increases of excise in the last two years and the pressure on consumers' disposable income in the last two quarters.

"Besides, illegal cigarette trade in Malaysia remains a key challenge in 2015 for the legal tobacco industry," it said.

However, the group said it continues to be very encouraged by the relentless enforcement efforts taken by various enforcement agencies and, in particular, the Royal Malaysian Customs to address the illegal cigarettes trade.

"As a result, the outlook for the rest of the year will depend on the recovery of the legal market," it said.

The counter was the top gainer today, with 181,900 shares traded. The shares closed RM1.10 or 1.74% higher at RM64.20, after rising as much as RM1.40 to an intra-day high of RM64.50.

(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. Go to[size=15][You must be registered and logged in to see this link.] for more details on a company's financial dashboard.)[/size]
[/size]