Lower sales impact Distilleries June performance

Distilleries Company of Sri Lanka PLC (DCSL), the country’s largest distiller with 60 percent market share in the alcoholic beverage market, reported revenues of Rs.14.6 billion for the April-june quarter (1Q21), compared to Rs.20.05 billion in the year earlier period, recording a decline of 27.4 percent.

The company reported earnings of 21 cents a share or Rs.982.8 million for the quarter, compared to earnings of 36 cents a share or Rs.1.66 billion in the comparable period, last year.

DCSL’S performance weighed on the profits of its parent Melstacorp PLC, as it accounts for nearly 60 percent of group revenues.

Melstacorp, which has interests in plantations, telecommunication, insurance, power generation, textiles, leisure, logistics and BPO, recorded a net loss of Rs.2.1 billion for the April-june quarter, from a profit of Rs.1.19 billion in the year earlier period, mainly due to poor results from its spirits maker and the leisure business, which runs hotels and resorts in Sri Lanka and several other countries, under Aitken Spence PLC.

The sale of liquor at all bars, restaurants and retail outlets, was kept closed during the lockdowns that prevailed from mid-march to May.

As a result of subdued sales, DCSL said it curtailed production of liquor, to minimise the impact from excise duties, which otherwise have to be borne on unsold liquor.

The government has banned the importation of foreign liquor, as part of its broader restrictions on non-essential imports, to preserve foreign exchange.

While DCSL expects the ban to remain in place for a considerable period of time, the company expects the sale of locally produced liquor to offset the shortfall created by the absence of foreign liquors in the market.

However, the company remains cautious on the sale of cash cow products, as the pandemic could have implications on the buying power of the bottom of the pyramid market segment, in the short term.

Meanwhile, DCSL called for the removal of the ban on ethanol imports, as the local ethanol production is insufficient to meet the demand of all manufacturers and the prolonged restriction could encourage illegal distilling, causing health hazard to consumers.

The government banned the imports of ethanol on January 1, 2020.