Japan Tobacco to cut 40% workforce in Malaysia as part of global restructuring: report

19, Sep. 2019

KUALA LUMPUR, NNA - The Malaysian subsidiary of Japan Tobacco Inc. (JT) is considering cutting its workforce by about 40 percent or around 170 people over the next two years, according to a press report, as the world-leading parent company is restructuring its global operations.

The job cut by JT International Bhd. (JTI Malaysia) is necessary as Malaysia’s struggling tobacco market has been further hit by “the illicit cigarette trade and the unregulated vape industry” in the country, the Star Online reported on Tuesday.

A spokesman for JT’s head office in Tokyo told NNA that JT International, the Geneva-based international tobacco division of JT, has plans to “review its business management structure including rationalization over the next three years” as earlier announced. He said, however, that it is premature to comment on country-specific plans. JT International is due to eliminate 3,720 jobs while reinforcing its global business services (GBS) division with more than 1,300 people.

The Malaysian tobacco market condition “has not been improving and profitability for the industry as a whole has halved since 2015” when the tobacco excise tax was raised to 40 percent, the Star Online quoted one source as saying.

JTI Malaysia Managing Director Cormac O’Rourke told the daily that the operating environment in Malaysia has been extremely challenging over the past few years, primarily due to the development of illegal tobacco products, which represent as much as 60 percent of the market. “There is a significant and fast-growing illegal vaping segment that accounts for a further 10 percent of the market.”

According to a survey report recently released by JTI Malaysia, six out of every 10 packs of cigarettes sold in Malaysia are illegal products, causing the Malaysian government to miss 5 billion ringgits ($1.2 billion) in tobacco excise tax every year.

JTI’s global business services will be newly instituted in Manila (Philippines) and Warsaw (Poland) while the existing GBS facility in St. Petersburg (Russia) will be expanded, the JT spokesman said. “Operations at JTI’s organizations that can be centralized and many of professional operations there will be integrated and transferred to the three GBS.”

Accordingly, the status of the business service centers in Kuala Lumpur (Malaysia) and Manchester (England) is expected to change drastically. However, he said, “We have not made any decision at all regarding their closure.”

JTI’s rationalization plans are due to be explained to the staff of each of its organizations and, in some countries, require negotiations with trade unions. The spokesman said, “At the moment, there is nothing definite about details of the plans, including the number of jobs to be reviewed, the financial impact and scheduling.