Middle ground earnings for Carlsberg Malaysia in 3Q

KUCHING: Earningsof Carlsberg Brewery Malaysia Bhd (Carlsberg Malaysia) for the third quarter of financial year 2017 (3QFY17) came in line with analysts estimates, but it was not enough to change the ratings by AmInvestment Bank Bhd (AmInvestment Bank).

The research house in a note yesterday saw that Carlsberg Malaysia’s 3QFY17 earnings were in line as it believed valuations were fairly reflective of Carlsberg’s forward growth prospects.

“Carlsberg’s 3QFY17 recurring profit of RM42.8 million brought earnings for its first nine months of FY17 ( 9MFY17) to RM171 million. It was in line with our estimate at 79 per cent but below consensus at 72 per cent of fullyear numbers respectively,”AmI nvestment Bank said.

Carlsberg’s key highlights include its 3QFY17 Malaysian revenue growing 18 per cent, it added, noting that this is off a low base with purchases being frontloaded prior to the alcohol tax being implemented in July 2016.

“Favourable product mix and higher average selling prices (ASPs) at about five per cent were contributing factors as well. Since the tax revision, Carlsberg has gained market share on Heineken Malaysia.

“However, this quarter may be indicative of market share erosion that has subsided with Heineken regaining market share against Carlsberg, growing 32 per cent y-o-y for the quarter.”

Carlsberg’s domestic margin improvement by 3.3 percentage points to 17.8 per cent for the quarter is attributed to higher ASPs and higher advertising and promotion, stemming from Euro 2016 weighing on 3QFY16’s margins.

Regionally, its Singaporean quarterly top line appears to have exhibit seasonal trade destocking resulting in a drop og eight per cent year on year. In 3QFY17, Singapore earnings contracted 84 per cent, which was further weighed by what the analysts think is a lumpy provision for trade offers amounting to RM18 million.

“We are encouraged over its Sri Lanka-based associate brewery Lion Brewery turning a profit of RM0.6 million in 3QFY17. It is aligned with our expectations and management’s guidance on the turnaround at Lion Brewery.

“However, Lion Brewery may not be as profitable as it was in the past. Aside from resuming production operations, we are wary that malt liquor demand has been structurally altered following a steep double excise duty hike in late 2015.”