Not because of community awareness on the danger of smoking but due to 70% of domestic consumption dominated by illegal cigarettes (60%) and vape (10%)

Cormac O'Rourke,
managing director of JTI Malaysia

THE second largest tobacco company in Malaysia will be undertaking a significant downsizing exercise, just two years after it shut down its manufacturing plant. 

According to sources, JT International Bhd (JTI Malaysia) is looking at trimming its workforce by about 40%, or around 170 people, over the next two years.

While the redundancy progress will be across the company, it is learnt that this will mainly affect the company's shared services.

The shared services operations are expected to be closed down within the time frame and could be relocated to another country.

Sources said the market has been very challenging and it is made worse by the illicit cigarette trade and the unregulated vape industry.

The market condition in Malaysia has not been improving and profitability for the industry as a whole has halved since 2015 ever since the huge increase in excise duty.

It is learnt that the staff of JTI Malaysia have been informed of the rationalisation programme on 30 August 2019.

The source added that sales of legitimate cigarettes in Malaysia used to be in the tuned of 20 billion sticks annually but now, the industry is struggling to even achieve 7 billion sticks.

A briefing by JTI Malaysia early last month revealed that illegal cigarettes and unregulated vaping products have since ballooned to 70% of the total consumption in the country, which bleeds the government some RM6bil in uncollected taxes.

JTI Malaysia managing director Cormac O'Rourke said following a review of the company's business operations, structures and processes, JTI Malaysia has proposed to make changes to how it operates here, including a reduction in employee numbers.

This development has led to a more than 30% decline in the size of the overall legitimate industry.

"As a result of this challenges, a transformation of the operations in Malaysia is necessary to ensure overall business sustainability," O'Rourke said in a statement, adding that this will require a complete review of all investments JTI Malaysia currently make in the operations of its business in the country, including those in support of the retail trade.

He said the decision to change the way the company operates will enable it to improve operational efficiencies and meet the business needs and the ability to face the challenges ahead.

Japan Tobacco Inc recently announced plans to eliminate 3,720 positions over three years.

Just on Thursday 12 September 2019, British American Tobacco announced that it planned to cut 2,300 jobs by January 2020.

Philip Morris International Inc, which is another major player, is also in talks with Altria Group Inc to reunite in a merger.

JTI Malaysia, which carries Mevius, Winston and LD brands, currently has an estimated market share of 25% in the country. It was delisted from the Main Market of Bursa Maĺaysia on 25 June 2014, leaving British American Tobacco (Malaysia) Bhd, also known as BAT (Malaysia), as the only listed tobacco company in Malaysia.

BAT (Malaysia) saw 32.09% dip in net profit for the second quarter to RM77.23mil. Net profit for the first half of the year also recorded a decline of 21.21% to RM165.15mil. Year-to-date, its share price had dropped 41% to RM21.50 at its last close.

by Fauzi Kadir  ° Permadu Malaysia
● 2019 Permadu Malaysia
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