Lion Brewery 2Q sales and profits slump due to lockdowns

• Company estimates a Rs.20bn loss to state revenues from store closures 

Lion Brewery (Ceylon) PLC (LION) reported subdued financial performance for the three months to September (2Q22), as the beer maker had to contend with the prolonged lockdowns, which erased nearly a month-long sales amid the soaring commodities prices, weaker rupee and dollar shortage. 

The company reported sales of Rs.11.2 billion for the July-September quarter, down 26 percent from the same period last year, as the sales of alcohol beverages were suspended for 27 days, when the country was under lockdowns from August through September-end. 

“These closures meant that retail outlets, including those permitted to sell alcohol products, were completely shut, resulting in no sales for the products of the company,” LION said. 

A request for online sales of alcoholic beverages was shot down by the virus-controlling task force, which resulted in the company losing billions of rupees of sales and depriving the government of billions of rupees of tax income. 

“Whilst most FMCG products were permitted online sales, this facility is not provided for beer and hence zero turnover was recorded during these closures. In addition to the lost sales opportunity to the company, the government too was deprived of an estimated Rs.20 billion of tax income from the alcohol sector,” the company added.

The company for the July-September quarter reported earnings of Rs.6.82 a share or Rs.545.7 million, compared to earnings of Rs.13.60 a share or Rs.1.09 billion in the comparable period in 2020, a 50 percent slump in the bottom line. 

For the six months to September, the company reported earnings of Rs.14.45 a share or Rs.1.16 billion, on revenues of Rs.21.7 billion, virtually the same level of earnings and revenues to that of the corresponding period last year. 

“Although the headline financial result is far below potential, given the challenges faced, the results are acceptable and reflect the company’s strong fundamentals and the good work being carried out by our teams,” LION said.
Despite the disruptions in the domestic market, LION continued to expand its sales to overseas markets, as its exports turnover had recorded a growth of 77 percent from the same period last year. While this growth was almost entirely driven by its existing markets, the company expressed intention to further penetrate into them going forward. 

Meanwhile, LION expressed concerns about the soaring inflation fears, which could cut into people’s disposable incomes and thereby the growth momentum. 

“However, with the cost of living concerns, disposable income will be tight for some period of time and as such, the recovery may be uneven,” the company added. 

Apart from the rising consumer price inflation, the company is also faced with higher producer prices, due to the general increase in the commodities prices and weaker rupee. 

Further, the company had also faced some serious obstacles when importing raw materials, due to the dollar shortage, as “foreign currency payments are placed in a ‘Dollar queue’ with some essential imports given priority over other products”. 

The company renewed its calls for a sensible tax policy on the alcoholic beverages industry in order to ensure consumer affordability of legal products while tackling the menace of illicit liquor. By the end of September, Ceylon Beverage Holdings PLC held a 52.25 percent stake in LION while Carlsberg Brewery Malaysia Berhard had a 25 percent stake, being the company’s second largest shareholder.