KUALA LUMPUR (May 25): British American Tobacco (Malaysia) Bhd (KL:BAT) posted its first-ever quarterly loss since taking its current form following the 1999 merger of Rothmans of Pall Mall (Malaysia) Bhd and Malaysian Tobacco Company Bhd, as higher costs linked to the retail display ban and worsening illicit cigarette trade weighed on earnings.

The tobacco manufacturer incurred a net loss of RM35.15 million for the first quarter ended March 31, 2026 (1QFY2026), compared with a net profit of RM23.27 million a year earlier, as revenue halved to RM160.3 million from RM322 million, a bourse filing on Monday showed.

Operating expenses jumped 74.7% year-on-year to RM64.68 million, mainly due to one-off regulatory implementation expenses and restructuring-related costs.

Managing director Nedal Salem said higher operating costs were mainly due to regulatory compliance investments, particularly the implementation of the retail display ban, as well as the roll-out of the group’s new route-to-market model aimed at improving operational efficiency.

He added that the legal tobacco industry continues to face pressure from persistent illicit trade and regulatory challenges, although the group remains focused on cost optimisation and disciplined execution.

BAT Malaysia said legal combustible volumes fell 4.5% in the January to March period, while illicit cigarette incidence hit 56.7% of total industry volume, rising from 54.4% in the preceding quarter — the first increase since 2021. This means an estimated additional 22 million illicit cigarette sticks entered the market in the quarter under review, compared to the preceding quarter.

Rising illicit trade continued to erode market share and weigh on overall industry dynamics despite intensified enforcement efforts, the group said.

In line with the weaker performance, BAT Malaysia declared a first interim dividend of five sen per share, down from 7.5 sen declared a year ago. The entitlement date is June 26, while payment is scheduled for July 24.

Salem said the first quarter represented a transition period for the group as it implemented internal changes aimed at strengthening its long-term operating model and competitiveness.

“Historically, the first quarter is the softest trading period for the group. As market conditions normalise and our structural changes take effect, we are cautiously optimistic of a sequential improvement in performance in the second quarter,” he added.

Shares of BAT Malaysia closed 11 sen or 1.8% lower at RM6.17 on Monday, valuing the group at RM1.76 billion. The stock has traded largely flat over the past year.