Sri Lanka: Lion Brewery Ceylon Ltd reports falling sales

Sri Lanka's dominant beer maker Lion Brewery Ceylon Ltd, is reporting falling sales as twin hikes in excise duties in November and December last year, take their toll on guzzlers wallets, Lanka Business posted August 29.

Sri Lanka witnessed two budgets last year within a month, following a change of government, and each presentation raised excise duties by LKR5.00 each. The government also raised the VAT rate on beer from 18 percent to 20 percent last August.

Lion says industry volumes have since declined by 15 percent this year, which has also dragged down its revenues by 2-percent to LKR 951.42 million for the three months to June '06.

"Hard alcohol sales volumes have grown during this period since they continue to enjoy a preferential duty structure in comparison to soft alcohols," Lion told shareholders August 29.

The firm said post-tax profits fell 29 percent to LKR 45.6 million from April-June over the same period last year, as possible limits on alcohol advertising and a booming illicit liquor industry eroded market share.

Lion, which commands around 80 percent market share, notes that stiff excise taxes are also blamed for Sri Lanka's heavy illicit liquor consumption of 6.27 million hl a year.

Despite an estimated 240,000 raids per year or 28 raids every hour for illicit alcohol sales, the local illicit liquor industry is thought to account for 90 percent of consumption.

In comparison, the number of legal liquor outlets throughout the country – including five-star hotels – amounts to under 3,000.

The company also hit out on 'naïve policy decision' to enact a law banning the alcohol advertisements.

"Whilst we accept the need to control the promotion of alcohol in markets where the consumption of legal liquor is widespread, in the local context, where illicit alcohol is predominant, we believe that the enforcement of the bill will negate the intent of the lawmakers," the firm said.

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