BAT Malaysia’s Q1 FY2025: Navigating Headwinds with Strategic Focus
The latest financial report from British American Tobacco (Malaysia) Berhad (BAT Malaysia) for the first quarter ended 31 March 2025 (Q1 FY2025) paints a picture of a company facing significant headwinds, yet demonstrating strategic resilience. While overall revenue and profit saw declines, the Group’s flagship brand, Dunhill, continues to strengthen its market leadership, and management is proactively addressing industry challenges. Let’s dive into the details of their performance and what it means for the road ahead.
Key Takeaway: Despite a challenging operating landscape marked by softened demand and the persistent tobacco black market, BAT Malaysia managed to improve its gross profit margin and declared a first interim dividend of 7.5 sen per ordinary share.
Core Financial Highlights: A Closer Look at the Numbers
BAT Malaysia’s Q1 FY2025 results reflect a tough market. The Group reported a noticeable drop in revenue and profit from operations compared to the same period last year. However, a closer look reveals some strategic wins, particularly in gross profit margin.
Q1 FY2025
Revenue: RM322 million
Profit from Operations: RM39 million
Gross Profit Margin: 23.5%
Profit After Tax: RM23 million
Earnings Per Share (EPS): 8.2 sen
Q1 FY2024
Revenue: RM412 million
Profit from Operations: RM46 million
Gross Profit Margin: 20.6%
Profit After Tax: RM30 million
Earnings Per Share (EPS): 10.5 sen
Revenue & Profit Decline: Revenue for the quarter stood at RM322 million, a significant 21.8% decline from RM412 million in Q1 FY2024. This was primarily driven by a 20.6% decline in the Group’s volume, attributed to seasonality factors and the early start of the Ramadhan fasting period in 2025. Consequently, profit from operations also decreased by 15.7% to RM39 million, while profit after tax saw a 22.4% drop to RM23 million.
Gross Profit Margin Improvement: Despite the volume challenges, the Group’s gross profit margin remarkably rose by 2.9 percentage points. This improvement, from 20.6% to 23.5%, was supported by a more effective portfolio mix strategy, indicating a shift towards higher-margin products or more efficient cost management in their sales mix.
Earnings Per Share & Dividends: Earnings per share (EPS) for the quarter were 8.2 sen, down from 10.5 sen in the prior year. Reflecting their commitment to shareholders, the Board of Directors declared a first interim dividend of 7.5 sen per ordinary share, amounting to RM21.5 million, payable on 3 July 2025.
Segmental Performance & Brand Strength
While the overall market demand softened, BAT Malaysia’s flagship brand, Dunhill, continued to defy the trend. It grew its market share by 0.7 percentage points compared to the same period last year, solidifying its position as the No. 1 brand in Malaysia. However, this gain was somewhat offset by a 0.4 percentage point decline in Aspirational Premium brands and a 0.7 percentage point decline in Value-For-Money brands, leading to a marginal 0.6% decline in the Group’s overall market share.
Here’s a snapshot of key financial figures:
| Financial Indicator (RM’000) | Q1 FY2025 | Q1 FY2024 | Change (%) |
|---|---|---|---|
| Revenue | 321,997 | 411,968 | -21.8% |
| Gross Profit | 75,675 | 84,727 | -10.7% |
| Profit from Operations | 38,761 | 45,961 | -15.7% |
| Profit After Tax | 23,273 | 29,988 | -22.4% |
| EPS (sen) | 8.2 | 10.5 | -21.9% |
Navigating Risks and Charting Future Prospects
Managing Director Nedal Salem acknowledged the challenging operating landscape, citing the high incidence of the tobacco black market and softened demand due to seasonality. However, he emphasized the continued strength of Dunhill and the Group’s focus on strategic growth.
Industry Challenges and Strategic Responses:
- Tobacco Black Market: Despite intensified enforcement actions by authorities, which saw the incidence of the black market reduce from 56.4% in January 2024 to 54.8% in January 2025, it remains a significant challenge. BAT Malaysia urges the government to continue intensifying these efforts.
- Regulatory Landscape (Act 852): The Control of Smoking Products for Public Health Act 2024 (Act 852) is taking effect in phases throughout 2025, including new pictorial health warnings, labelling requirements, and a retail display ban by October 2025. BAT Malaysia views this as a crucial step towards regulating the industry and states it is fully prepared to navigate these changes.
- Vapour Product Transition: In compliance with the new regulations for vapour products, the Group will transition out its current range of Vuse products in Q3 2025. They will undertake commercial assessments before deciding on future product launches in this segment, with a continued focus on combustible value growth.
Optimistic Outlook:
Despite the challenges, BAT Malaysia remains optimistic about its financial performance in 2025. This optimism is underpinned by Malaysia’s positive economic indicators, including a projected 4.4% GDP growth in Q1 2025 and an anticipated 5.2% year-on-year growth in consumer spending. The Group plans to strengthen its performance by focusing on:
- Growing Dunhill’s leadership in Malaysia.
- Driving quality and sustainable growth in the Premium, Aspirational Premium, and Value-For-Money segments.
Summary and
BAT Malaysia’s Q1 FY2025 results highlight a period of adaptation amidst a tough market. While revenue and profit faced pressure from declining volumes and the persistent black market, the Group’s strategic focus on its core brands, particularly Dunhill, and effective portfolio management allowed for an improved gross profit margin. The company is actively preparing for and adapting to the evolving regulatory landscape, which is crucial for long-term stability.
Key points from the report:
- Revenue and profit declines primarily due to reduced volume and seasonal factors.
- Strong performance of flagship brand Dunhill, gaining market share.
- Improved gross profit margin, indicating effective portfolio management.
- Proactive stance on the new Control of Smoking Products for Public Health Act 2024 (Act 852).
- Continued challenge from the tobacco black market, with calls for further government action.
- Commitment to shareholder returns through a declared interim dividend.
The company’s outlook emphasizes resilience in its combustibles business and strategic growth in key segments, while acknowledging 2025 as a transitional year due to regulatory changes. Investors should monitor how the phased implementation of Act 852 and the ongoing efforts against the black market impact the company’s future performance.
As a senior blogger observing the Malaysian market, it’s clear that BAT Malaysia is navigating a complex environment. Their ability to improve gross profit margins despite volume declines speaks to strong internal management and strategic pricing. The regulatory changes, while challenging, also offer an opportunity for a more level playing field if enforcement is effective. The consistent dividend payout, even in a challenging quarter, underscores their commitment to shareholder value.
Do you think BAT Malaysia can maintain its strategic momentum and grow its market share in the face of these ongoing challenges? Share your thoughts in the comments below!
