Sri Lanka’s largest brewer sees challenging year ahead with tourism slowdown

„Earnings up 7% to Rs.737.7mn in 1Q20

„Beer sales up 10% to Rs.11.7bn

„Pays Rs.7.2bn in Excise Duty

Sri Lanka’s largest brewer saw its earnings for the quarter ended June 30, 2019 (1Q20) rising modestly but Lion Brewery PLC (LION) expects a difficult financial year ahead, following the April 21 Easter Sunday attacks that dealt a paralysing blow to the country’s booming tourism industry.

LION reported earnings of Rs.9.83 per share or Rs.786.2 million for the quarter under review, against earnings of Rs.9.22 per share or Rs.737.7 million reported for the same period, last year, which indicates an increase of 7 percent yearon-year (YOY).

The beer sales for the quarter rose 28 percent YOY to Rs.11.7 billion. LION reported a gross profit of Rs.2.7 billion, up 10 percent YOY, despite a 34 percent hike in the cost of sales.

However, a 170 percent YOY spike in other expenses to Rs.230 million saw the group reporting an operating profit of Rs.1.5 billion, down 3 percent YOY.

The interim financial accounts did not explain the reasons for the hike in other expenses.the group’s net finance costs fell 59 percent YOY to Rs.125.9 million as the finance income rose 52 percent YOY to Rs.338.1 million.

The income tax expense for the quarter surged over 500 percent YOY to Rs.565.9 million.

LION said it paid Rs.7.2 billion to the government in Excise Duty during the quarter under review, an increase of 36 percent YOY.

“The events of April 21 and the challenges faced by the economy subsequently will likely exert pressure on the company’s results in the forthcoming quarters.

Tourism is unlikely to reach the previous year’s level and footfall of local patrons into on premise outlets is also not expected to pick up significantly in the short term. Thus, the remainder of the year will prove challenging,” LION said in an earnings review.

The company also renewed its call for tougher regulations against illegal booze, which deprives revenue to the government and the consumer a safer and regulated product.

The company maintains that the best way to fight illicit liquor is to make legal beverage products affordable.

“Whilst it may be politically unpalatable, the reality is that the most effective policy measure against illicit alternatives is to make legal products more affordable and reasonably accessible.”the Carson Cumberbatch group owns 60.75 percent of LION shares both directly and through subsidiaries. Carlsberg Brewery Malaysia Berhad owns 25 percent of the company as the second biggest shareholder.