British American Tobacco Malaysia Bhd. · MYX:BAT
British American Tobacco Malaysia Bhd — Q4 2017 Earnings Presentation
23 slides from British American Tobacco Malaysia Bhd's earnings presentation, Feb 13, 2018
Slide 1: Transforming Today for Tomorrow: 4th Quarter 2017 Performance
TRANSFORMING TODAY FOR TOMORROW 4th QUARTER 2017 PERFORMANCE 13th February 2018
Slide 2: Agenda
AGENDA ▪ Business Review ▪ 2017 Financial Results
Slide 3: Business Review
Business Review
Slide 4: 2017 Business Highlights
2017 Business Highlights BAT share growth Dunhill share growth New supply chain model Leadership in Aspirational Dec’17: 54.6% fully operational Premium +1.4 ppt vs 2016 improving gross profit (FY: 53.9% Rothmans strong in VFM margin -3.2ppt vs 2016) segment Decline in legal market 2017 Financial im
Slide 5: Recap: Key areas influencing business performance
Recap: Key areas influencing business performance High Illegal Trade Level Consumer Affordability VFM Entry Average consumer daily RM 35 expenditure (National) Premium RM17 64% 22% 14% 2x Meals Transportation Communication VFM RM12 Addressing Effective Alternatives to curb affordability but Enforcem
Slide 6: Market review update
Market review update Legal market stabilised in 2017 with concern in Q4 703 668 660 642 624 603 606 605 Q1'16 Q2'16 Q3'16 Q4'16 Q1'17 Q2'17 Q3'17 Q4'17 2017 vs. 2016: To-Date Avg. FY 2017 vs FY 2016 FY 2017 Q4 Q3 Q4 vs Q3 (Jan-Sep) SPLY Industry 668 610 -8.8% 605 624 -3.0% BAT 389 332 -14.5% 331 336
Slide 7: BAT gaining share exit 2017 vs exit 2016
BAT gaining share exit 2017 vs exit 2016 Share of Market – Malaysia (%) 57.1 53.9 53.9 54.6 53.2 53.6 55.0 0.4 6.5 1.8 2.8 50.0 7.5 7.4 7.6 4.3 7.2 7.1 45.0 4.1 4.5 4.4 3.7 3.6 40.0 35.0 42.2 30.0 38.1 37.1 37.5 37.7 37.8 25.0 20.0 2016 FY 2017 FY DEC'16 Q1'17 Q4'17 Dec'17 Dunhill Pall Mall Peter St
Slide 8: Strong start in emerging VFM segment
Strong start in emerging VFM segment VFM important to address consumer affordability Rothmans Retail Audit Performance Rothmans SOM (%) 2.8 2.0 0.6 Oct-17 Nov-17 Dec-17 RM 12.00 Rothmans establishes a strong position Short term impact on gross margin, long term generator for growth
Slide 9: Strong brand portfolio enabling share recovery
Strong brand portfolio enabling share recovery Dunhill grew market share exit 2017 vs First time Leadership in Aspirational exit 2016 Premium 46.1 7.5 42.2 38.1 37.1 37.5 37.7 37.8 6.5 5.6 4.3 2014 2015 2016 2017 2015 2016 2017 Dec'16 Q1'17 Q4'17 Dec'17
Slide 10: We are proud of 2017
We are proud of 2017 The business is stronger in spite of a challenging macro environment 1 Dunhill market share growing 2 Aspirational Premium gaining segment leadership since Feb’17 3 Rothmans entering VFM with strong equity and winning formula 4 Business transformation successful – full importati
Slide 11: Our concern - Illegal cigarettes continued to grow
Our concern - Illegal cigarettes continued to grow +1.7ppt GPI 58.0 58.9 58.1 59.0 57.3 47.1 35.9 Illicit Volume Share Sep'15 Nov'15 May'16 Oct'16 Dec'16 Q1'17 Q2'17 Q3'17 Q4'17 Challenging environment for any legal company to operate in Source: Track Dec 2017 (R3M)
Slide 12: Shareholder's value negatively impacted by illegal trade
Shareholder’s value negatively impacted by illegal trade BATM Share Price Market Capitalization Nov15’: Figures in Ringgit per Share Illegal trade from Figures in Ringgit (billion) Excise hike 33% to 59% @ 40% 62.00 64.10 18.3 18.2 45.00 44.80 12.8 40.00 11.40 2010 2015 2017 2015 2010 2017 Share Pri
Slide 13: Massive illegal trade should be hard to hide!!!
Massive illegal trade should be hard to hide!!! Illegal cigarette trade Volume 200 million packs 625 million packs • 29 warehouses Distribution network • 500 delivery vans running daily ? •• 90 warehouses? 1500 delivery vans? RM 493 mn Est about RM 1bn Profit (Profit after tax) RM 1.6 bn – excise No
Slide 14: The Bitter Truth: Illegal cigarette trade is a huge societal problem
The Bitter Truth: Illegal cigarette trade is a huge societal problem • Illegal cigarette trade is simply too big to ignore - At close to 60%, it is the biggest tobacco player, though not contributing anything to this country. • Accepting it undermines shareholder returns, the health agenda, many job
Slide 15: Financial Performance
eA 405 Wee Financial Performance
Slide 16: Financial Metrics Evolution
Financial Metrics Evolution YTD Q4 vs .SPLY Q4 vs. Q3 Volume -14.2% -3.2% Revenue -20.1% -7.5% Operating -4.7% +39.1% expenses -9.8% excl. prov for impairment of prepaid excise +14.9% excl. prov for impairment of prepaid excise Profit before tax -24.8% -45.3% w/o restructuring Q4 bottom line impacte
Slide 17: Gross margin evolution quarter on quarter
Gross margin evolution quarter on quarter Volume Decline New Factory Sourcing VFM entry 36.3% 36.5% 34.7% 33.3% 31.9% Gross Profit/ Revenue (%) 31.0% Q3'16 Q4'16 Q1'17 Q2'17 Q3'17 Q4'17 Sourcing change allowed margins recovery in 2017 & investment for VFM
Slide 18: Inventories evolution quarter on quarter
Inventories evolution quarter on quarter Total Inventories (RM’mn) 228 233 237 214 184 Q4'16 Q1'17 Q2'17 Q3'17 Q4'17 Inventories increased due to prepaid excise duties. Continuous effort to optimize working capital
Slide 19: Operating expenses evolution quarter on quarter
Operating expenses evolution quarter on quarter Discrete quarter operating expenses(RM’ million) -4.7% -18.1% -4.7% -21.2% -9.8% -26.3% 20.5 YTD vs SPLY evolution (%) w/o prov. for tax stamps 399.0 359.8 -18.1% +41.8% -34.4% +12.7% 20.5 119.1 97.5 121.2 97.7 79.6 75.4 85.0 83.3 Q1'16 Q1'17 Q2'16 Q2'
Slide 20: Optimizing cost in delivering bottom line
Optimizing cost in delivering bottom line 2017 Performance vs. SPLY Revenue Operating Expenses (RM'mn) Total Mfg Revenue 262 47 -4.7% 399 380 3,495 -20.1% 2,955 Q42016 2016 Q42017 2017 FY 2016 Q4 2016 FY 2017 Q4 2017 FY FY Profit from Operation (RM'mn) Profit from Operations (Excl. restructuring exp
Slide 21: Dividend payout
Dividend payout 2016 2017 RM 2.78 RM 1.69 110.0% Payout 98% Payout -27% vs 2016 Special dividend 0.46 0.77 0.55 0.55 0.45 0.40 0.43 0.43 0.43 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Slide 22: Business challenges remains unchanged
Business challenges remains unchanged High illegal cigarette Consumer Affordability level Future outlook dependent on the recovery of the legal market and the willingness to take positive actions
Slide 23: Thank You
THANK YOU
British American Tobacco Malaysia — Q4 2017 Earnings Presentation on 6ix