23 May 2019 12:01 am
Sri Lanka’s largest brewer, Lion Brewery (Ceylon) PLC, has signalled a slowdown in business in the immediate future due to the Easter Sunday bombings that targeted churches and hotels, killing over 250 people.
The bombings have crippled Sri Lanka’s tourism industry that accounts for 5 percent of the country’s GDP.
Booming tourism has been a major driver of higher beer sales in the country.
“Unfortunately, the economy has taken a few steps back because of these events and we are likely to see a significant drop in tourism in the months ahead.
“Whilst this has the potential to challenge our results in the immediate future, the management is taking all possible steps to continue the positive momentum achieved in the year that just concluded,” Lion Brewery said releasing its March quarter (4Q19) results.
The company reported earnings of Rs.10.35 per share or Rs.827.8 million, compared to earnings of Rs.12.73 per share or Rs.1.01 billion reported during the corresponding quarter of the previous year. This translates into a profit decline of 28 percent.
Last year’s profits were helped by an insurance receipt to the tune of Rs.492.7 million.
The revenue for the three months under review rose 18 percent year-on-year (YoY) to Rs.11.9 billion. But the operating profit edged up only by one percent YoY to Rs.1.567 billion.
During the last month of the quarter under review, the government increased beer taxes by 12.5 percent but the excise duty on ‘Extra Special Arrack’—the major contributor to arrack voles, was kept unchanged.
However, the excise duty on other arracks was increased by 7.5 percent.
“Once again it seems that policy consistency is being compromised, an age‐old challenge for the private sector in Sri Lanka. Ostensibly, the tax on Extra Special Arrack remained unchanged since it was the ‘poor man’s drink.
“Encouraging the ‘poor man’ or for that matter anyone to drink the much more harmful hard alcohol is an unusual policy measure to say the least,” Lion Brewery said.
Due to the discriminatory tax, the beer industry saw a volume contraction between 2014 and 2016, while the hard liquor volume increased by almost 27 percent, as the excise duties per unit of alcohol of strong beer surpassed that of hard liquor.
Meanwhile, for the year ended March 31, 2019, Lion Brewery recorded earnings of Rs.40.26 per share or Rs.3.2 billion, compared to Rs.22.97 per share or Rs.1.8 billion reported for the previous year.
The revenue rose 44 percent YoY to Rs.42.8 billion.
The Carson Cumberbatch group owns 60.75 percent of LION shares both directly and through subsidiaries. Carlsberg Brewery Malaysia Berhad owns 25 percent of the company shares as the second biggest shareholder.