Malaysia: Heineken Malaysia looking towards positive impact on profits on absence of prosperity tax
Heineken Malaysia Bhd is looking towards a positive impact on its net profit this year with the absence of the prosperity tax imposed in 2022, the New Straits Times reported.
However, managing director Roland Bala said the company will remain adaptive to the imposed effective tax rate (ETR) amid a challenging market outlook.
"We continue to work on unlocking efficiencies whilst looking for opportunities to reinvest in the business," he told the New Straits Times.
Bala said as part of the industry, Heineken Malaysia will continue to engage the government and share constructive feedback through the appropriate channels to create understanding about its socioeconomic contributions.
In 2022, Heineken Malaysia contributed over RM1.6 billion in taxes to the government.
For the second quarter (Q2) ended June 30, 2023 (FY23), Heineken's net profit grew 5.11 per cent to RM90.47 million from RM86.07 million a year ago, despite challenging market conditions, leading to a decrease in sales.
Its quarterly revenue fell 11.7 per cent to RM569.24 million from RM644.58 million previously, mainly due to lower sales due to weak consumer sentiment driven by the rising cost of living and currency volatility.
The brewery had a strong base in Q2 of 2022 as the market had an upsurge in sales following the re-opening of the economy and international borders at the start of the endemic phase.
The company views this quarter's performance as a form of market correction, it said in a recent filing to Bursa Malaysia.
For the cumulative period of six months, Heineken Malaysia posted a higher net profit of RM200.4 million from RM199.45 million a year ago, while revenue dropped to RM1.31 billion from RM1.34 billion previously.
Moving on, Bala said Heinekan Malaysia regularly reviews its products' pricing with a view to developments in the market landscape.
"While the specific mechanics of pricing are commercially sensitive, we consider the affordability of our products to our consumers to be an important aspect in determining the pricing of our products.
"We also consider our cost base and inflationary pressures," Roland said when asked about the lingering inflationary pressures and pricing strategy.
Despite missing the optimistic first half of 2023 (1H23) earnings forecast, RHB Research still thinks the sector will offer a higher degree of earnings resiliency against soft consumer sentiment, given the relatively inelastic demand for beer and pricing power.
"As such, we believe the current valuation is undemanding, and the attractive dividend yield is well supported by strong cash flow generation," RHB Research analyst Soong Wei Siang said in a recent report.
The firm foresees consumer sentiment remaining subdued in the near term, considering the lingering inflationary pressures and lack of festivities in the third quarter (Q3) of this year.
"As such, we expect Heineken Malaysia to focus on marketing initiatives to better engage with consumers and stimulate spending," RHB Research noted.
RHB Research said the easing of raw material prices, if sustained, could translate into margin expansion in the second half of 2023 (2H23).
"In addition, we view the premiumisation strategy and continuous efficiency gain as the other effective levers to maintain the elevated earnings base amidst the challenging business environment on top of the normalisation of the ETR post-Cukai Makmur," the firm said.
It maintained a "Buy" call for Heineken Malaysia with a target price of RM31.80 a share.
뒤로
E-malt.com, the global information source for the brewing and malting industry professionals. The bi-weekly E-malt.com Newsletters feature latest industry news, statistics in graphs and tables, world barley and malt prices, and other relevant information. Click here to get full access to E-malt.com. If you are a Castle Malting client, you can get free access to E-malt.com website and publications. Contact us for more information at marketing@castlemalting.com .
