Lion Brewery writes off most of Millers’ assets within six years of acquisition

• Now carries only a third of what it originally paid during acquisition in 2014   

Lion Brewery (Ceylon) PLC paid Rs.4.0 billion in October 2014 to acquire the brands owned by Millers Brewery Limited, hoping the best of the synergies between the two companies’ supply chains but six years later, the company had already written off nearly three-quarters of its investment as the acquired brands never performed even remotely close to its 
own brands. 

According to the past seven years of financial reports parsed by Mirror Business, Lion Brewery was seen taking impairment charges against Millers’ brands worth of a cumulative Rs.2.9 billion through March 2021, as part of its annual impairment tests carried out on the company’s brands. 

With the most recent impairment of Rs.449.1 million charged against its profits for the financial year ended on March 31, 2021, Lion Brewery now carries only Rs.1.4 billion worth of brand assets, from Rs.4.0 billion it paid seven years ago, as the forecasted sales from the Millers’ brands continue to underwhelm the sales of its own brands. 

Earlier the company had taken a Rs.1.7 billion impairment charge against these brands in the financial year ended in March 2017, after the sharp tax increase on beer caused an industry downturn, while another impairment of Rs.740.0 million was charged in the financial year ended in March 2020, due to their underperformance compared to Lion’s own brands. 

“The Millers Brands, when marketed alongside Lion’s brands, attract little traction. Hence, the decline in the volumes of the Millers brands gets compensated by demand for products from the Lion portfolio,” Lion Brewery Chief Executive Officer Dr. Rajiv Meewakkala said a few weeks ago in his annual review of operations to the shareholders. 

Lion Brewery manufacturers and sells beer under its namesake brand and Carlsberg. The latter is brewed and marketed under licence. 

Lion Brewery in October 2014 acquired Millers Brewery from Cargills (Ceylon) PLC in a two-stage deal—the first stage being the acquisition of the five beer brands of Millers for Rs.4.0 billion, which consisted of Sando Power, Sando Stout, Three Coins, Grand Blonde and Irish Dark. 

The second stage of the deal was the acquisition of the company itself for Rs.1.15 billion, paid on account of the intangible assets of Millers Brewery through Pearl Springs (Pvt.) Limited, a fully-owned subsidiary of Lion Brewery, after all liabilities were settled. 

In the financial year ended in March 2021, Lion Brewery reported earnings of Rs.2.5 billion on revenues of Rs.49.8 billion, up 4.0 percent from the previous year, particularly due to the robust performance in exports, as the virus-related restrictions dampened domestic sales.