British American Tobacco Malaysia Bhd. · MYX:BAT
British American Tobacco Malaysia Bhd — Q2 2017 Earnings Presentation
22 slides from British American Tobacco Malaysia Bhd's earnings presentation, Jul 20, 2017
Slide 1: Transforming Today for Tomorrow: 2nd Quarter 2017 Performance
TRANSFORMING TODAY FOR TOMORROW 2nd QUARTER 2017 PERFORMANCE 20th July 2017
Slide 2: Agenda
AGENDA ▪ Business Review ▪ Q2 2017 Financial Results
Slide 3: Business Review
Business Review
Slide 4: Q2 Business Highlights
Q2 Business Highlights YTD 2017 share recovery First decline in illicit -1.0ppt in 10 months +1.3 ppt driven by Dunhill Classic Revenue back to growth Volume recovery +6.1% +6.2% Quarter on quarter (excl. Quarter on quarter exports) Business recovering, however, environment remains challenging
Slide 5: Macro environment stabilizing, however, consumers still being cautious
Macro environment stabilizing, however, consumers still being cautious Consumer expenditure still high Consumer confidence remains low CCI Q1’17 Food Consumer CPI Inflation 4.3% inflation 4.1% Transportation 118% 77 demand for finished goods still low -1.1% Overall cost of goods still high Indicatio
Slide 6: Corporate share growth driven by Dunhill
Corporate share growth driven by Dunhill Share of Market – Malaysia (%) 57.1 +1.3ppt 53.9 54.2 54.5 53.2 53.5 6.5 7.7 7.4 7.7 7.6 7.6 4.3 4.3 4.5 4.4 4.2 4.2 42.2 38.8 37.9 37.1 37.4 38.5 2016 FY 2017 YTD DEC'16 Q1'17 APR'17 MAY'17 Dunhill Pall Mall Peter Stuyvesant BAT Source: YTD May’17 Nielsen Re
Slide 7: BAT brands continued to recover driven by Dunhill and Peter Stuyvesant
BAT brands continued to recover driven by Dunhill and Peter Stuyvesant BAT Brands Performance YTD Key Activities May vs. Q4 38.8 Total Dunhill (+1.7) Dunhill Classic (14% SOB Illicit) Total Peter Stuyvesant 7.6 (+0.2) 4.2 Total Pall Mall Peter Stuyvesant Limited (-0.3) Edition pack Source: YTD May’1
Slide 8: Market review update
Market review update Legal market stabilized in Q2’17 Big-3 IMS (mns) 703 668 660 642 603 606 Q1'16 Q2'16 Q3'16 Q4'16 Q1'17 Q2'17 2017 vs. 2016: Q2 Discrete Avg. 2016 2017 Change Industry 668 606 -9.3% BAT 390 340 -13.0% Source: Industry Exchange In-Market Sales (Sales to retail outlets)
Slide 9: Volume recovery driven by share growth and illicit decline
Volume recovery driven by share growth and illicit decline 2016 Excise Impact 2017 recovery 58% 59% 59% 58% 51% 54% 48% Illicit Volume Share 38% Normal Ramadhan impact (-10% to -15%) Volume Recovery BAT Domestic 128 Weekly Run Rate 94 91 87 77 79 80 79 (mns) 76 2015 Q1'16 Q2'16 Q3'16 Dec Q1'17 Apr M
Slide 10: The first decline in illicit trend in 10 months
The first decline in illicit trend in 10 months Encouraging government drive to make illicit a national agenda Legal Volume Share 65.0 64.1 59.2 58.8 58.8 58.9 60.0 58.0 57.9 55.6 - 1 ppt 55.0 51.7 52.9 50.0 47.1 48.3 45.0 + 1 ppt 44.4 40.0 42.0 41.2 41.2 41.1 42.1 40.9 35.9 35.0 Illicit Volume Shar
Slide 11: Welcome to the Next Chapter
Welcome to the Next Chapter Virginia Park, Wisma Guocoland, Petaling Jaya Bukit Damansara New corporate office @ 4th Sep 2017
Slide 12: Brandlaureate Bestbrands Awards 2016-2017
Brandlaureate Bestbrands Awards 2016-2017 Winner of the illustrious Brand Most Sustainable Brand Award in Transformational Leadership the Business and Community Award Leadership category Malaysia Best Employer Brand Awards 2017 “Malaysia Best Employer Brand Awards” from the Employer Branding Institu
Slide 13: Q2 2017 Financial Performance
Q2 2017 Financial Performance
Slide 14: Key Highlights
Key Highlights Q2’17 vs. previous quarter ▪ Strong quarter on quarter performance across financial metrics ▪ Revenue back to growth driven by volume and market share ▪ Cost base transformation continues to drive efficiencies on operating expenses ▪ Solid profit growth vs. previous quarter YTD Q2’17
Slide 15: Financial Metrics: Q2 2017 vs. Previous Quarter
Financial Metrics: Q2 2017 vs. Previous Quarter Domestic & Duty Free Volume Revenue 1,144mns 774 mil +6.2% vs Q1’17 +0.4% vs Q1’17 +6.1% vs Q1’17 Excluding contract manufacturing in Q1 2017 Operating Expenses Profit from Operations 80mil 198 mil -18.4% vs Q1’17 +25.3% vs Q1’17
Slide 16: Revenue back to growth in Q2
Revenue back to growth in Q2 Domestic & duty free volume Change vs. previous Qtr Illicit 1,500 59% 58% Volume - 1.0 ppt 60% Share 1,300 1,100 50% Market 900 40% Share + 1.0 ppt 700 30% 500 1,077 1,144 BAT 20% 300 Volume +6.2% 10% 100 -100 Q1 2017 Q2 2017 0% 1,200 1,000 Revenue 800 600 +0.4% 400 771
Slide 17: Cost Base and Profit improved driven by cost base initiatives and one offs
Cost Base and Profit improved driven by cost base initiatives and one offs Operating Expenses (RM'mn) Main Drivers 97 -18.4% 80 • Cost base transformation Q1 2017 Q2 2017 • Sub-lease rental Profit from Operation (RM'mn) • Timing of spend 198 158 +25.3% Q1 2017 Q2 2017
Slide 18: YTD Q2 Performance vs. SPLY
YTD Q2 Performance vs. SPLY Revenue and volumes impacted by illicit trade Domestic & duty free volume Illicit Change vs. previous Qtr 3,500 60% Volume 59% +18% 50% Share 3,000 50% 2,500 40% 2,000 30% 1,500 2,673 20% 1,000 2,221 BAT Volume -16.9% 500 10% 0 0% YTD Q2 2016 YTD Q2 2017 Revenue 2,000 176
Slide 19: YTD Q2 Performance vs. SPLY
YTD Q2 Performance vs. SPLY Optimizing cost in delivering bottom line Operating Expenses (RM'mn) Main Drivers • Sub-lease rental • Reduction of recharges 240 -26.3% 177 • Cost base transformation YTD Q2 2016 YTD Q2 2017 • Timing of spend Profit from Operations (RM'mn) Profit from Operations (Excl. r
Slide 20: Dividend payout
Dividend payout 2016 2017 RM 2.78 YTD 110.0% Payout *Special dividend 0.46 0.77 0.55 0.55 0.45 0.40 0.43 Q1 Q2 Q3 Q4 Q1 Q2
Slide 21: Good Q2 performance, however business remains challenging
Good Q2 performance, however business remains challenging High illicit level Consumer Affordability Macro environment will need to improve for long term sustainable growth
Slide 22: Thank You
THANK YOU
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