By Timothy S. Donahue
Top Takeaways:
- Historic loss: BAT Malaysia reported its first quarterly net loss since the company’s formation following the 1999 Rothmans-MTC merger.
- Illicit trade worsens: Illegal cigarettes climbed to 56.7% of Malaysia’s total market volume in the first quarter.
- Regulatory costs rise: The company cited expenses related to starting its retail display bans and restructuring as major profit pressures.
British American Tobacco Malaysia posted its first quarterly loss since its current corporate structure was formed by the 1999 merger of Rothmans of Pall Mall (Malaysia) and Malaysian Tobacco Company, as mounting regulatory costs and a rising illicit cigarette trade pressured earnings.
BAT Malaysia reported a net loss of RM35.15 million ($7.5 million) for the first quarter ended March 31, compared with a profit of RM23.27 million the previous year. Revenue fell sharply to RM160.3 million, down from RM322 million in the prior-year period.
The company said operating expenses surged nearly 75% year over year to RM64.68 million, driven largely by one-time regulatory implementation costs and restructuring-related expenses. Managing Director Nedal Salem said the company absorbed substantial spending tied to Malaysia’s retail tobacco display ban and broader operational restructuring.
“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,” Salem said.
The results also highlighted growing pressure from illicit cigarettes in Malaysia, which remains one of the largest illicit tobacco markets in Southeast Asia. BAT Malaysia said illicit cigarette incidence rose to 56.7% of total industry volume in the quarter, up from 54.4% in the previous quarter — marking the first increase since 2021.
According to the company, the increase represents roughly 22 million additional illicit cigarette sticks entering the Malaysian market in the quarter, compared with the prior period. “Rising illicit trade continued to erode market share and weigh on overall industry dynamics despite intensified enforcement efforts,” the company said.
BAT Malaysia also reported a 4.5% decline in legal combustible cigarette volumes for the January-to-March period. The weaker performance prompted the company to reduce its first interim dividend to five sen per share, down from 7.5 sen a year earlier.
Salem described the quarter as a transitional period as the company restructures operations and seeks to strengthen long-term competitiveness.
“Historically, the first quarter is the softest trading period for the group,” Salem said. “As market conditions normalise and our structural changes take effect, we are cautiously optimistic of a sequential improvement in performance in the second quarter.”
Malaysia’s retail tobacco display ban took effect earlier this year as part of broader tobacco-control legislation to reduce product visibility and youth access.
Shares of BAT Malaysia closed down 1.8% on Monday at RM6.17, giving the company a market value of approximately RM1.76 billion.
