BAT Malaysia Reports Lower 2Q Profit Amid Increased Investments to Grow Vuse; Declares 12 sen Dividend

British American Tobacco (Malaysia) Bhd (KL:BAT) reported that its second quarter net profit dropped 23.66% amid the group's increased investment into growing its vaping brand, Vuse, in Malaysia.

Net profit for the three months ended June 30, 2024 (2QFY2024) fell to RM36.28 million from RM47.53 million in 2QFY2023, as revenue dropped 5.55% to RM640.46 million from RM678.12 million, BAT's bourse filing showed.

The cigarette company declared a second interim dividend of 12 sen per share or a total of RM34.2 million, payable on Aug 22 to its shareholders.

This brings BAT's dividend payout for the first half of FY2024 (1HFY024) to 22 sen per share totaling RM62.75 million, compared with 29 sen per share that amounted to RM82.8 million in 1HFY2023.

BAT’s cumulative net profit for 1HFY2024 came in at RM66.27 million, down 24.57% from RM87.85 million in 1HFY2023, due to higher operating expenses associated with the launch of its vapour product, Vuse.

Cumulative revenue for 1HFY2024 slipped 1.49% to RM1.05 billion from RM1.07 billion, as the group's total volume dropped 5.3% while industry volume dropped 3% amid ongoing industry pressures.

"The group’s volume experienced a decline of 5.3%, resulting in a 1.5% decrease in revenue to RM 1,052 million, largely driven by decline in FMC (factory-made cigarettes) volume, partially offset by sales from vapour products. Gross profit decreased by 8.5% attributed to lower margin of vapour products and heightened inflationary impact. Operating expenses for year-to-date 2024 increased by 5.4%, driven by the cost associated with the launch of vapour product, Vuse.

"Consequently, the profit from operations declined by 22.3% from RM132 million to RM102 million," BAT Malaysia said in its filing.

BAT Malaysia managing director Nedal Salem said the group's financial results were within expectations given the continued investments to grow Vuse in Malaysia. "Our ambition is to build A Better Tomorrow and the group remains confident that its strategic investments to grow the No 1 global vaping brand will help to deliver sustainable growth in Malaysia,” he said.

At the same time, he called for a review of tax policies to further combat the black market in the upcoming Budget 2025 tabling, as the black market for tobacco products remained a significant problem, with a prevalence of 54.8%.

“The group also believes that the Control of Smoking Products for Public Health Act 2024 is a step in the right direction for the industry and that any regulations introduced must be sensible and evidence-based to ensure that it can be enforced effectively and deliver its intended objectives, without fuelling the growth of the tobacco or vapour black market,” he added.

Shares of BAT Malaysia closed up three sen or 0.36% at RM8.37 on Wednesday, giving it a market capitalisation of RM2.39 billion. Year to date, the stock has dropped 84 sen or 9.12%.