Malaysia: Carlsberg Malaysia reports substantial Q2 and H1 net profit declines due to Covid-19 pandemic

The Covid-19 pandemic has adversely impacted Carlsberg Brewery Malaysia’s earnings during the second quarter ended June 30,2020, as the group registered a substantial 84% year-on-year decline in net profit at RM10.65 mln, The Star Online reported on August 14.

This brought Carlsberg Malaysia’s net profit for the first half of FY20 to RM83.6 mln, as compared to RM152.86 mln in the same period last year.

The weak set of earnings were severely impacted by production suspension for seven weeks and limitations to sales and distribution due to measures under the movement control order (MCO) in Malaysia as well as Circuit Breaker (CB) in Singapore.

However, the adverse impacts of Covid-19 was partially mitigated by tighter cost controls under the Fund the Journey programme, which comes as part of the group’s strategic priorities.

Apart from that, the group recognised a one-off RM6.4 mln settlement with the Royal Malaysian Customs during the second quarter, for the bill of demand on excise duties issued by the Selangor state director in 2014.

Speaking during a virtual briefing and press conference last week, Carlsberg Malaysia managing director Stefano Clini (file pic) said the group anticipates business recovery to be gradual over the next few months, on the back of weak consumer sentiments and strict standard operating procedures.

Currently, an estimated 60% of on-trade outlets (eateries) are in operation, as compared to 20% during the MCO and CB period.

“Consumer sentiment will remain depressed particularly in the on-trade sector due to reduced capacities and shorter operating hours, health and safety restrictions, as well as various financial and operating challenges faced by food and beverage (F&B) businesses, which remain uncertain.

“We have been and will continue to be even more disciplined in optimising costs aggressively, reallocate investments on digital campaigns, e-commerce and off-trade, as well as extend various support to our business partners, ” he said.

Carlsberg Malaysia experienced a significant growth in its e-commerce volumes, although the segment remains relatively small.

Going forward, the group expects double-digit growth in its e-commerce segment and will dial up investments and marketing activities.

“We will review our business to ensure that our structures, processes and cost base are suited to a post-Covid-19 reality.

“With these strategies in execution, we are hopeful that the group will be able to sustain an acceptable performance despite this unprecedented crisis, until such time that the Covid-19 pandemic is overcome, and businesses can operate fully, ” he said.

Clini added that the management has set an internal cost savings target, noting that it is an “aggressive target”, which will also support the group’s business beyond Covid-19.

Under these difficult circumstances, the board has decided to suspend the quarterly dividend payments for FY20, in a move to preserve cash and liquidity, with the intent to strike a balance between the long-term health of Carlsberg Malaysia and its shareholders’ returns.

The suspension of the quarterly dividend payout will be reviewed at the end of the next quarter.

“On the regulations front, we welcome the government call to amend the Road Transport Act 1947 to curb driving under the influence of alcohol and drugs. In view of increased challenges ahead, we appeal to the government to support the F&B and hospitality industry by facilitating the approval for liquor licence renewals and new liquor licence applications to stimulate homegrown F&B businesses, ” Clini added.

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