Sri Lanka: Ceylon Brewery’s profits plunged 74% in 4th quarter 2006
Ceylon Brewery, Sri Lanka's top brewery group, profits plunged 74 percent in the December quarter, with high soft alcohol taxes, an advertising ban and low tourism arrival hitting the bottom line, the company told shareholders, according to Lanka Business, March 2.
Lion Brewery also listed company controlled by Ceylon Brewery saw its profits fizzle down to 5.2 million in the quarter from 111 million in 2005, while the 9-month number was down to a mere 6 million from 360 million a year ago.
Ceylon Brewery said falling tourist arrivals, a ban on beer advertising and lost business in the war torn north east regions hurt volumes.
"However, the most compelling issue faced by the industry at the moment is the relative price between beer & arrack,” the Ceylon Brewery said. “The price of arrack in terms of alcohol content remains significantly cheaper than beer. As a result, Sri Lankan consumers have consumed significantly more alcohol this year than they did in the previous year," the firm claimed.
Ceylon Brewery says increased consumption of hard alcohol is against the stated aim policymakers to reduce consumption.
"In the meanwhile illicit alcohol continues to grow apace," Ceylon Brewery said. "Rising inflation will no doubt help the illicit alcohol industry further boost its sales since price conscious arrack consumers will shift to the lower cost product. With pricing between arrack & beer being what it is, we can expect a similar shift from the price conscious beer consumer as well."
Group revenues remained flat during the quarter at 985 million rupees. In the 9-months it was up one percent, 972 million rupees.
The group said inflation and rupee depreciation also hit the firm increasing costs and slashing margins.
The firms said an Indian joint venture with Carlsberg will start commercial production in Rajastan in 2008.
The Indian company will also acquire a north Indian brewery as a plan of progress.
Ceylon Brewery share closed at 80.75 rupees Thursday and Lion Brewery at 64.50.
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