British American Tobacco (BAT) has announced it is winding down its manufacturing business in Malaysia in stages, in a move expected to affect more than 200 employees.
The shut down of its local factory is expected to be completed by the second half of 2017, and BAT has acknowledged some form of support for the affected staff.
"The restructuring is in line with the company’s efforts towards realising a new and more sustainable business model, amidst an increasingly challenging business environment," BAT said in a statement.
"This includes high excise taxes, which have ultimately led to the sharp rise in illegal cigarette incidence and significantly lower legal sales volume, resulting in rising production costs."
BAT explained that over the last five years, cigarette taxes increased by 110%. This encompassed four massive increases including the unprecedented increase in November 2015, which was close to 40%.
Consequently, legal sales volume also declined significantly whilst illegal cigarettes now make up more than 40% of the total market.
The firm added the winding down of the factory operations will affect approximately 230 employees.
These employees will be provided a benefits package as well as the option to undergo a career-transition programme.
“We take great pride in our factory and our people. This restructuring and our journey towards a transformed business model will no doubt have an impact across the organisation. Our utmost priority has always been and will continue to be, the wellbeing of our people,” said Stefano Clini, managing director of BAT Malaysia.