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Cigarette maker BAT reports third quarterly rise in profits

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However British American Tobacco says the black market is hampering its recovery with 2020 profits down by 28%.

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Free Malaysia Today
BAT Malaysia has called on the government to narrow the price gap between legal and contraband cigarettes.

PETALING JAYA:
Cigarette makers British American Tobacco Malaysia said increased black market tobacco and vape use as a result of the financial stresses on consumers hindered its financial recovery efforts for the fourth quarter of 2020.

The company said it expected demand for these illicit products to remain high this year, as those who had been affected by the prolonged lockdown may continue to turn to these cheaper alternatives.

BAT Malaysia’s profit from operations was RM346 million for 2020 — down 28% from RM478 million in 2019.

The company attributed the dip in profits to the strong illegal market, market downtrading and lower duty-free sales.

However, the company recorded RM104 million in profit for the quarter, up 19% compared with Q3, the third straight quarter of growth recorded by the company.

Revenue also increased 5% to RM660 million from Q3, outperforming the legal industry average quarterly growth of 5%, driven largely by the success of their flagship Dunhill brand and the increased market share of their budget options, KYO and Rothmans.

In a statement announcing the company’s quarterly results, BAT Malaysia managing director Jonathan Reed said while the government had made a “good start” in addressing the black market, there was an urgent need to narrow the price gap between legal and contraband cigarettes.

“Only then can the illegal cigarettes problem be addressed effectively and tax losses stemmed,” he said.

“Further, it is critical for the government to introduce regulatory and excise frameworks for nicotine vaping.

“This will ensure that the one million Malaysian vapers can access products of known quality and allow the government to collect significant revenue.”

In the 2021 budget speech, the government had pledged to take action to crack down on illegal cigarettes, which make up 65% of the total market.

It included freezing the issuance of new import licences for cigarettes and limiting transshipment of cigarettes to dedicated ports.

It was also announced that the government would legalise and regulate the vape market, impose an excise duty of 10% on all types of electronic and non-electronic cigarettes, and impose an excise duty of 40 sen per millilitre on the liquid used in electronic cigarettes.

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