One-off restructuring expenses hit BAT’s Q2 earnings

PETALING JAYA: British American Tobacco (M) Bhd (BAT) second quarter net profit tumbled 78.2% to RM47.72 million from RM219.34 million a year ago, as a result of one-off restructuring expenses amounting to RM86 million in relations to the winding down of its factory operations.
Revenue in the period declined by 11.5% to RM962.57 million from RM1.08 billion, the company said in a filing to Bursa Malaysia yesterday.
BAT, the country’s biggest cigarette maker, said the winding down of its manufacturing facility in Petaling Jaya also led to a 42.7% decline in profit from operations.
“Profit from operations, excluding the impact of one-off restructuring expenses, declined 28.8% (RM178 million),” it told the stock exchange yesterday.
Based on the audited net book value of the group as at Dec 31 2015, the proposed disposal of the factory is expected to result in a total net gain of about RM149 million.
This will translate into an increase in earnings per share by about 52.1 sen based on the weighted average number of ordinary shares in issue as at Dec 31, 2015, it said.
BAT said it will review and determine the use of the gross cash proceeds of RM218 million by the end of 2016, and “may be utilised to declare dividends, undertake capital reduction and/or repay current revolving credit facilities.”
BAT declared a second interim dividend of 45 sen per share.
For the six months ended June 30, 2016, BAT’s earnings more than halved to RM220.32 million from RM461.08 million. Revenue fell by 16% to RM1.98 billion due to lower overall volume and rising cost pressures.
BAT managing director Erik Stoel said the total legal domestic market experienced a volume decline of 26.3% in the first half of 2016 which as a result led to a contraction to the company’s domestic and duty free volumes by 28.9% compared to last year.
“The overall volume reduction and its consequent escalating cost pressures resulted in total revenue decline of 16% and gross profit of 21.5%, both when compared to the first half of 2015.
“This fall in volumes is principally driven by the steep excise increase in November 2015 and the industry has yet to see any signs of recovery,” he said in a separate statement yesterday.