Sri Lanka: Ceylon Brewery reports sharp fall in profits due to advertising ban

The Ceylon Brewery, which owns Sri Lanka's top beer brand, has reported a sharp fall in group profit for the year ended March 31, 2007 as an advertising ban and falling tourist arrivals hit consumption, according to LBO, May 14.

Net profit plunged 48 percent to 69.9 million rupees for the year ended March 31, 2007 from 134 million rupees the year before while group revenue rose to 3,982 million rupees from 3,846 million rupees.

A sharp rise in income tax - to 92 million rupees from 18 million rupees – also hit the group's bottom line, according to its annual report released recently.

Ceylon Brewery has told shareholders that high taxes on soft alcohol, a ban on advertising and a downturn in the tourism industry caused by an upsurge in the island's ethnic war was affecting consumption.

A decline in business in the war torn north-east region also reduced volumes.

The firm brews and bottles beer its own brand Lion, through its subsidiary the Lion Brewery, and sells Carlsberg under license from Carlsberg International of Denmark.

The Lion Brewery's net profit for the same period plunged to 14 million rupees from 352 million the year before.

Revenue rose to 3,973 million from 3,842 million rupees the previous year.

The Board of Directors of the Lion Brewery has not recommended payment of a dividend for the financial year.

The brewer has consistently complained about the island's skewed tax policy where hard liquor is taxed lower than beer.

The company says the high taxes, which make beer relatively expensive, discourage beer consumption.