This article first appeared in The Edge Financial Daily, on November 4, 2015.

KUALA LUMPUR: British American Tobacco (M) Bhd (BAT), the country’s largest manufacturer of cigarettes, is raising prices across its cigarette portfolio by as much as RM3.20 per pack today, in an immediate reaction to an excise duty hike on tobacco announced by the government yesterday.

The latest quantum of price increase for its cigarette brands is BAT’s highest, as previously the price of a pack of 20 cigarettes only went up by as much as RM1.50.

According to BAT’s new price list seen yesterday, a pack of Dunhill, Benson & Hedges or Kent cigarettes (20 sticks) now costs RM17, up RM3.20 from RM13.80.

A pack of Lucky Strike Plain now sells for RM17.50, RM3.20 more than RM14.30 previously, while Shuang Xi cigarettes go for RM18, up RM3 from RM15. 

Peter Stuyvesant and Pall Mall cigarettes now retail at RM15.50 per pack, also up RM3.20 from RM12.30 previously.

The new prices are inclusive of the 6% goods and services tax (GST), said BAT.

“This extreme hike in cigarette excise done against the backdrop of both weakened economy and consumer sentiments will definitely fuel further an already high level of illegal cigarettes, where one in three packs is illegal,” BAT managing director Stefano Clini said in a statement yesterday.

“We cannot imagine the impact that this more than 40% increase in excise will have on the industry,” he added.

Clini noted that the tobacco industry had already been hit by the 12% hike in cigarette excise on Nov 1 last year.

“This was followed by the implementation of the GST at 6% beginning April 1.

“Consequently, BAT had to increase its cigarette prices, taking into consideration the sum mandated by the excise increase, and its impact on [the] GST and inflationary cost pressures,” he said.

BAT previously raised prices in early April by 50 sen for its premium cigarettes, shortly after the GST came into effect, but the move was scrapped soon after and tobacco prices returned to pre-GST rates.

However, after absorbing the cost for close to three months, BAT announced a 30 sen increase for its premium and sub-premium cigarettes on June 29.

Meanwhile, BAT saw its domestic volume fall 9.9% year-on-year in the third quarter ended Sept 30, 2015, and analysts attributed the decline to the price hike that took place at end-June, coupled with the pressure from higher cost of living.

BAT (valuation: 1.5; fundamental: 1,35) shares closed RM1.30 or 2.13% higher at RM62.30 yesterday, with a market capitalisation of RM17.79 billion.

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