British American Tobacco Malaysia Bhd. · MYX:BAT
British American Tobacco Malaysia Bhd — Q3 2017 Earnings Presentation
24 slides from British American Tobacco Malaysia Bhd's earnings presentation, Oct 23, 2017
Slide 1: Transforming Today for Tomorrow: 3rd Quarter 2017 Performance
TRANSFORMING TODAY FOR TOMORROW 3rd QUARTER 2017 PERFORMANCE 23rd October 2017
Slide 2: Agenda
AGENDA Business Review Q3 2017 Financial Results
Slide 3: Business Review
Business Review
Slide 4: Q3 Business Highlights
Q3 Highlights Business Illegal cigarette Legal market volume Successful transition to incidence stabilizing but stable excluding higher full importation model still very high inventory levels in trade Gross margins improvement for 3rd -2.0ppt +3.0% consecutive quarter vs Q2 vs Q2 Stable BAT volume,
Slide 5: Key areas influencing business performance
Key areas influencing business performance High Illegal cigs Level Consumer Affordability VFM Competition Average consumer daily RM 35 expenditure (National) Premium 58.0 58.9 58.5 56.1 RM17 47.1 64% 22% 14% 35.9 2x Meals Transportation Communication VFM RM12 Rothmans Alternatives to curb Effective
Slide 6: AIT Enforcement
AIT Enforcement Illegal cigarette trade remains very high despite marginal decline in Q3 GPI 58.0 58.9 58.5 56.1 47.1 These numbers do not include the emergence of new local brands with fake tax stamps 35.9 Illegal cigs Vol share Sep'15 Nov'15 May'16 Oct'16 Dec'16 Apr'17 Jul'17 Aug'17 Source: TRACK
Slide 7: Small packs: Why we support this and why it is bigger than BAT
Small packs Why we support this and why it is bigger than BAT As a legal and respected member of the Malaysian business community we feel it is our responsibility & right to defend fair competition and drive sustainability for BAT and the legal industry. So, yes, small packs is about business sustai
Slide 8: Red card! Illegal competition
Illegal competition – This is not a debate about what you think of smoking Red card! Football a game we all like. A fair competition governed by rules. But what if one side does not respect the rules? That’s called cheating….. It has consequences! illegal cigarettes - You don’t have to smoke to unde
Slide 9: Why legal small packs is a good idea
Why legal small packs is a good idea: • Smoking is a legal adult lifestyle choice. • We are a legal cigarette company in Malaysia. • Illegal cigarettes break the law and help criminals. • Illegal cigarettes do not curb smoking. • Illegal cigarettes do not contribute to society So we should look real
Slide 10: Market review update
Market review update Slight recovery in legal market driven by VFM inventories 703 668 660 642 624 603 606 Q1'16 Q2'16 Q3'16 Q4'16 Q1'17 Q2'17 Q3'17 2017 vs. 2016: To-Date Avg. 2016 2017 Change (Jan-Sep) Industry 679 611 -10.0% BAT 397 333 -16.1% Source: Industry Exchange In-Market Sales (Sales to r
Slide 11: First half share growth momentum interrupted by VFM and new illegal cigs dynamics
First half share growth momentum interrupted by VFM and new illegal cigs dynamics Share of Market – Malaysia (%) 57.1 54.0 53.2 53.6 54.5 53.9 6.5 7.6 7.4 7.6 7.5 7.6 4.3 4.3 4.5 4.4 4.2 4.1 42.2 38.3 38.9 38.4 37.1 37.5 2016 FY 2017 YTD DEC'16 Q1'17 Q2'17 Q3'17 Dunhill Pall Mall Peter Stuyvesant BA
Slide 12: BAT entering VFM segment with an iconic brand
BAT entering VFM segment with an iconic brand *Rothmans Entry required to address pressure on consumer spending RM power in spite of lower margins 12.00
Slide 13: New Chapter
New Chapter New operating model, transforming the cost base enabling consumer focus Successful factory closure and transition to import model
Slide 14: Recognition for our investment in talent
Recognition for our investment in talent BAT Malaysia has won these awards this year: 1. Excellence In Employee Engagement (Gold) 2. Excellence In Employer Branding (Silver) 3. Excellence In Leadership Development (Silver) 4. Excellence in Innovative Use of HR Tech (Bronze)
Slide 15: Q3 2017 Financial Performance
Q3 2017 Financial Performance
Slide 16: Financial Metrics Evolution
Financial Metrics Evolution YTD Q3 vs SPLY Q3 vs SPLY Q3 vs Q2 Volume -15.3% -11.9% -1.7% Revenue -21.0% -18.8% -2.2% Profit before tax -9.2% -23.5% -3.7% Profit before tax w/o restructuring -19.6% -22.7% -4.7% Signs of stabilization across key metrics, however business environment remains challengi
Slide 17: Q3 Financial impacted by Competitors' entry in VFM
Q3 Financial impacted by Competitors’ entry in VFM Domestic & duty free volume Revenue 1,144 -1.7% 1,124 -2.2% 774 757 Q2 2017 Q3 2017 Q2 2017 Q3 2017 Operating Expenses (RM'mn) Profit from Operations (RM'mn) 198 80 85 -4.2% 189 +6.9% Q2 2017 Q3 2017 Q2 2017 Q3 2017
Slide 18: Revenue and volumes impacted by illegal cigs trade
Revenue and volumes impacted by illegal cigs trade YTD Q3 Performance vs. SPLY Domestic & duty free volume Illegal cigs Change vs. SPLY 60% Volume 51% 58% Share +13.7% 5,000 50% 4,000 40% 3,000 30% 2,000 3,948 20% 3,345 BAT 1,000 Volume -15.3% 10% 0 0% YTD Q3 2016 YTD Q3 2017 Revenue 230 Contract Mf
Slide 19: Optimizing cost in delivering bottom line
Optimizing cost in delivering bottom line YTD Q3 Performance vs. SPLY Main Drivers Operating Expenses (RM'mn) • Cost base transformation • Reduction of recharges 316 -17.0% 262 • Sub-lease rental Q3 2016 Q3 2017 • Timing of spend Profit from Operations Profit from Operation (RM'mn) (Excl. restructur
Slide 20: Continue to transform cost base
Continue to transform cost base Operating Expenses YTD vs SPLY operating expenses (%) -18.1% -17.1% -26.3% -18.1% -34.4% +12.7% 119.1 121.2 97.5 85 79.6 75.4 Q1'16 Q1'17 Q2'16 Q2'17 Q3'16 Q3'17 Discreet quarter operating expenses (RM’ million) Cost base review during first half allows investment beh
Slide 21: Gross Margins and Working Capital
Successful implementation of new sourcing model Gross Margins Working Capital 36.3% 36.5% 304 34.7% 33.3% 233 31.9% 215 New Factory Transition Stabilization Volume decline Sourcing Q3'16 Q4'16 Q1'17 Q2'17 Q3'17 Q4'16 Q2'17 Q3'17 Gross Profit/ Revenue Inventories (RM M) Sourcing change allowed margin
Slide 22: Dividend Payout
Dividend Payout 2016 2017 YTD Special dividend 0.46 0.77 0.55 0.55 0.45 0.40 0.43 0.43 Q1 Q2 Q3 Q4 Q1 Q2 Q3
Slide 23: Business challenges remain unchanged
Business challenges remains unchanged High illegal cigarettes Consumer Affordability level Future outlook dependent on the recovery of the legal market and the development of lower price segment
Slide 24: Thank You
THANK YOU
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