Cheers for beer but not arrack in 3Q
According to the financial statements of 3Q of FY 2018/19, Lion Brewery has seen its profits soar while the Distilleries Company of Sri Lanka PLC’s (DCSL) profits have, comparatively, only grown slightly.
Sri Lankan-owned and operated beer manufacturer Lion Brewery (Ceylon) PLC recorded a net profit of Rs. 1.1 billion in the third quarter of financial year 2018/2019, a whopping growth of over 160% compared to the corresponding period in the FY 2017/2018.
In the third quarter of FY 17/18, Lion Brewery recorded a net profit of Rs. 0.4 billion.
The operating profit of Rs. 1.65 billion reported during this period is a Year-on-Year (YoY) growth of 94% in comparison to the same period in FY 2017/2018.
In the third quarter of FY 17/18, Lion Brewery reported an operating profit of Rs. 0.85 billion.
The company’s revenue during the third quarter of FY 18/19 was Rs. 11.2 billion, a YoY growth of 41% from the Rs. 7.9 billion during the same period in FY 17/18.
During this period, Lion Brewery recorded a gross profit of Rs. 2.9 billion, which is a growth of over 55% in comparison to the same period in FY 2017/2018.
Lion Brewery’s profit before taxation in this period was Rs. 1.4 billion while it was Rs. 0.5 billion in the corresponding period of the previous year.
Total income in the third quarter of FY 18/19 was Rs. 1.1 billion, a YoY growth of 167% while it was Rs. 0.4 billion in the third quarter of FY 17/18.
YoY improved performance of Sri Lanka’s and the Maldives’ beer market leader was driven by the increased number of tourist arrivals to the country and also the reduction on tax on beer in the Budget 2018 according to experts which increased the per capita consumption of beer.
Budget 2018 reduced excise taxes on strong beer by 33% which helped Lion Brewery to regain its market share.
In November 2015, excise duties on beer were increased by 70%, shifting consumer from beer to hard liquor, accounting for over 65% of the legal alcohol consumption.
The company which received international recognition over the years is managed by Chairman D.A. Cabraal and CEO Suresh Shah. The parent company of Lion Brewery (Ceylon) PLC is Ceylon Beverage Holdings PLC and the ultimate parent company is Bukit Darah PLC.
Meanwhile, premier blue-chip company and the largest distiller in the country, the Distilleries Company of Sri Lanka PLC’s (DCSL) net profit grew by 19% during the third quarter of FY 18/19 as it went up to Rs. 1.2 billion from Rs. 1 billion compared to the same period in FY 17/18.
Profit from the operations grew by 11.3% to Rs. 2.1 billion during the third quarter of FY 18/19, from Rs. 1.9 billion in the corresponding period of FY 17/18.
During the third quarter of FY 18/19, DCSL recorded gross revenue of Rs. 20.8 billion and a net revenue of Rs. 7 billion while during the third quarter of FY 17/18, a gross revenue of Rs. 22.4 billion and a net revenue of Rs. 7.3 billion was recorded.
Gross profit during this period grew by 8% YoY while the gross revenue and net revenue came down by 6.8% and 3.7% respectively.
Gross profit for the third quarter of FY 18/19 was Rs. 2.5 billion, while the corresponding period in FY 17/18 saw a gross profit of Rs. 2.3 billion.
Profit before tax from continued operations grew by 17.9% YoY during this period as it has increased to Rs. 2.1 billion from Rs. 1.8 billion in the third quarter of FY 17/18.
However, total comprehensive income during the third quarter of FY 18/19 was slightly lower to that of the corresponding period in FY 17/18 as it declined to Rs. 1.32 billion from Rs. 1.37 billion.
Three weeks ago, DCSL revised prices of liquor products owing to the increase in cost of production, stimulated by the rupee depreciation.
DCSL increased the price of a bottle of arrack by Rs. 10 while the price of a quarter-bottle was increased by Rs. 20.
However, the price of a half-bottle of “Special Arrack” was decreased by Rs. 20 while prices of certain products remain unchanged.
According to Retired Maj. Gen. Mano Perera from the DCSL Management Team, beer price reduction under the Budget 2017 resulted in dropped sales since then.
He said: “There is about a 12-15% drop in sales volume from 2017 to 2018 in the entire industry.”
According to Perera, hard liquor consumption has decreased while the soft liquor consumption has increased.
He also attributed this decline to illicit alcohol manufacturing that takes place in Sri Lanka.
According to the World Health Organisation (WHO) Global Status Report on alcohol for 2018, 40% of Sri Lanka’s liquor production is being undertaken illegally.
This causes a whopping loss for the Government in terms of excise duty and creates a drop in revenue for established distilleries.
DCSL is a diversified Sri Lankan conglomerate owned by Chairman Harry Jayawardena and was one of the first Sri Lankan companies to be listed in Forbes’s Best Managed Companies under a billion US dollars.