KUALA LUMPUR (Feb 16): British American Tobacco (Malaysia) Bhd (BAT Malaysia) posted a 52.2% increase in net profit for the fourth quarter ended Dec 31, 2016 (4QFY16) to RM299.12 million or RM1.013 per share, from RM196.12 million or 68.1 sen per share a year ago, due to a restructuring income of RM131.92 million .

Revenue was down 20.55% to RM840.61 million in 3QFY16, from RM1.06 billion in 4QFY15. The cigarette maker declared a fourth interim dividend of 77 sen per share and a special dividend of 46 sen per share amounting to RM351.2 million, payable on March 23.

For the full year (FY16), its net profit was 19.84% lower at RM732.07 million or RM2.526 per share, versus RM913.31 million or RM3.187 per share  during the previous year (FY15). While its revenue for the period fell 18.01% to RM3.76 billion, from RM4.58 billion a year ago.

BAT Malaysia told Bursa Malaysia today that on a full year basis, the total legal domestic market registered a volume contraction of 25.7%, compared to year 2015.

Meanwhile, it said its contract manufacturing business also declined by 46.2% versus the same period of last year (cigarettes and non-cigarettes), which was due to the winding down of the Group’s factory operations in Malaysia, which will be carried out in stages.

“All contract manufacturing volumes for exports have ceased as of Dec 31, 2016,” it said.

The group said it recorded a one-off restructuring expenses (RM113 million) in relation to the winding down of its factory operations, which was announced on Mar 17, 2016.

“The one-off restructuring expenses consist of provision for redundancies (RM41 million), asset impairment (RM36 million), provision for obsolete raw materials (RM14 million), project cost (RM9 million) and leaseback rental (RM13 million),” it said.

The group mentioned it has also recorded a one-off gain from disposal of the land and building on which the factory operations are located at, amounting to RM159 million.

“As a result of the above, the group registered a decline of 25.9% (RM321 million) and 26.2% (RM323 million) in Profit from Operations and Profit before Tax respectively, when compared to the same period of last year,” it added.

The group noted that the profit from operations, excluding the impact of one-off restructuring expenses and income, declined 29.5% (RM367 million).

Going forward, BAT Malaysia said it remains concerned with legal volumes continuing to be impacted by the current high levels of illegal cigarette trade, as a consequence of excise increases over the years, including the unprecedented hike in November 2015, as well as consumer down trading within the legal market.

"The high levels of illegal cigarette trade forms the main challenge in the short and medium term for the legal tobacco industry, after its sharp incidence increased from 36.9% in 2015 to 51.2% as recorded in the month of June 2016," said the group.

“The outlook of 2017 will be very much dependent on the recovery of the legal market,” the group added.

Shares in BAT Malaysia closed down 22 sen or 0.45% at RM48.78 today, giving it a market capitalisation of RM13.96 billion.