PETALING JAYA: British American Tobacco (M) Bhd’s (BAT) net profit grew 20% to RM220.85 million for the second quarter of 2012 (2QFY12) ended June 30 as its expenses dropped by a quarter, which helped widen the group’s profit margin.

Revenue came in marginally higher at RM1.06 million against RM1.04 billion in the previous corresponding period. The cigarette maker has declared a fi rst-tier second interim dividend of 65 sen per share, representing 84% of its earnings per share of 77.3 sen.

This brought the total dividend per share to RM1.30 so far this year. BAT said the higher pace of growth in its profi tability as opposed to its top line was due to the by lower distribution cost after the change in distribution model in 2011 and the absence of merchandising depreciation following the change in accounting treatment in 4QFY11.

“Revenue in 1H12 [the first half of 2012] grew by 3.7% compared with [the] corresponding period in 2011, attributed to both higher domestic volume and higher contract manufacturing revenue due to higher volume and higher margin following the change from toll to full contract manufacturing model,” said BAT in the results announcement.

“Profit before tax increased by 14.4% compared with same period last year, significantly ahead of gross profit growth. This diff erence is owing to operating expenses being 25% lower than the comparable period last year,” the group said.

For 1H12, BAT’s profit increased 14.5% to RM415.36 million from RM367.7 million in the corresponding period last year. Revenue rose 3.7% to RM2.11 billion from RM2.04 billion in 1H11.

BAT’s market leadership ex-THE EDGE FILE PHOTO panded 2.2 percentage points to 62.3%, with Dunhill being the best performer, accounting for 47.6% of market share, a record high for the brand as at June 2012.

BAT’s volume grew by 1.6% during the first six months of the year against the previous corresponding period. On the trading of illicit cigarettes, BAT said the latest results posted a 2.6% drop in illicit trade compared with same period last year.

“The government’s decision not to increase cigarette excise in the 2012 budget, together with the continuous enforcement eff orts by its law enforcement agencies, are clearly starting to deliver results,” said BAT.

BAT’s share price has fared well this year. Th e dividend stock touched its record high of RM57.88 on Wednesday. Year-to-date, it has gained nearly 14.7%. Th e counter closed at RM56.72 yesterday.

This article appeared in The Edge Financial Daily on July 20, 2012.