Lion Brewery March quarter hit by coronavirus lockdowns

Sales remained flat and profit ebbed at Lion Brewery Ceylon PLC during the three months ended March 31, 2020, as lockdowns hurt the retail beer sales from mid-March amid the restrictions on tourism trade, which accounts for a considerable amount of sales.

Lion, Sri Lanka’s largest brewer with exporting to over 30 markets around the world, reported sales of Rs.12.1 billion in the three months to March, little changed from a year ago.

The company said its business operations were shut from March 20 to May 11.

The company last week resumed shipments to a section of its export markets while the sales at home resumed from May 15, with the exception of the Colombo and Gampaha districts, where liquor and beer sales were permitted only at licensed supermarkets. 

“With the islandwide removal of the lockdown on May 26, 2020, the retail outlets in all districts with the exception of restaurants and pubs were reopened and hence the operations of the company and its subsidiaries have now 
been resumed. 

In the case of restaurants and pubs, these outlets are progressively being reopened consequent to them receiving approvals from the local Public Health Inspector,” Lion said in a note accompanying the interim results. 

However, the company expects a drop in the demand in the ongoing year, due to the impaired disposable incomes and the significant decline in tourist arrivals.    

The company reported operating profits of Rs.815.9 million for the three months under review, down 48 percent from the year earlier period, due to higher direct costs. 

While there was some control on overheads, the company booked a Rs.202.1 million charge in respect of brands acquired from Millers Brewery Limited. 

For the full year, the company wrote off Rs.740.3 million as impairment against the Millers’ brands after back-to-back impairment tests carried on the brands Sando Power, Sando Stout, Three Coins, Grand Blonde and Irish Dark it acquired for Rs.4 billion.

In total, Rs.2.41 billion has been written-off as impairments of those brands. 

Lion acquired Millers Brewery Limited and its subsidiary Pearl Springs (Private) Limited in the 2014/15 financial year for Rs.5.15 billion
Meanwhile, for the quarter under review, the company reported earnings of Rs.6.84 a share or Rs.547.5 million, compared to Rs.10.35 a share or Rs.827.8 million in the year earlier period. 

For the full year ended March 31, 2020, the company reported earnings of Rs.35.15 a share or Rs.2.8 billion on sales of Rs.47.8 billion, compared to earnings of Rs.40.26 a share or Rs.3.2 billion on sales of Rs.42.8 billion. 

The full-year sales were up 12 percent despite the market crippling events—one from the Easter Sunday attacks and its aftermath at the beginning of the year and the coronavirus lockdowns at the close of the financial year of the company. 

“Whilst we all face difficult times ahead, past experiences have demonstrated our resilience as a country and this time too we are confident that Sri Lanka will emerge stronger. As for the company, we have the brands, the route to market, the technology and the people to be ahead of the curve when the process of recovery begins,” the company said in its earnings note. 

Ceylon Beverage Holdings PLC owns a 52.25 percent stake in Lion while Carlsberg Brewery Malaysia has a 25 percent stake in the company.