BAT announces $200-M, 5-year capex program

BRITISH American Tobacco’s Philippine unit has rolled out a $200-million, five-year capital spending program following the passage of the new “sin tax” law that raised excise tax rates on tobacco.

James Lafferty, BAT Philippines general manager, yesterday said in a briefing that the company would invest mainly in expanding its work force and distribution system.

Lafferty said the amount was just the minimum, considering that the company would never again leave the country now that the "unlevel playing field" was now being addressed.

“(The public) should realize that it takes years for the effects of a new law to play out,” he said. “We cannot judge it in the few months of implementation, especially in the first quarter of 2013.”

The BAT chief said the usual frontloading that companies usually do before higher excise taxes take effect would dis- tort market performance reports in the early part of the year.

Frontloading means tobacco firms advance their shipments near the end of the year prior to the tax hikes to avoid higher liabilities.

“There are rumors that multiple months worth of supply was produced under the old excise rates,” Lafferty said.

“Beside this massive pre-production, there is this supply shortage that we can’t understand (why it is happening),” he added.

He said BAT itself “pre-produced no volume” but he explained that BAT products—although its blend of tobacco leaf contains local harvest—were manufactured in Malaysia.

Currently, BAT—which owns 300 brands worldwide—sells only Lucky Strike in the Philippines.

BAT is currently the smallest player in the 100-billion-stick domestic cigarette market and, with sales of “a couple million” sticks last year, has a market share of less than 1 percent, he said.