Brewers expect Covid-19 to continue to impact operations in 2021

Heineken and Carlsberg post lower net profits of RM154.2m and RM162.2m in 2020 due to Covid-induced MCOs and the SOPs imposed


THE year 2020 proved to be challenging for brewers following various levels of Movement Control Orders (MCOs) that were implemented and the limitation for physical social events that have impacted consumption, thus slowing down operations for the companies.

For the first time in its history, Heineken Malaysia Bhd had to suspend its operations for 46 days following MCO 1.0, which saw a drop in its earnings.

The group’s net profit for its fourth quarter ended Dec 31, 2020 (4Q20), dropped 40.6% year-on-year (YoY) to RM54.17 million from RM91.17 million a year ago, largely due to lower revenue and a one-off provision of RM14 million in December for costs associated with the organisational restructuring exercise implemented this year.

Revenue for the quarter contracted 23.7% to RM519.02 million from RM680 million, mainly due to lower sales impacted by the government’s implementation of wider restriction and stricter standard operating procedures (SOPs) relating to social activities.

For the whole year, the group registered a lower net profit of RM154.2 million against RM312.97 million in 2019, down 50.7% YoY due to the restrictions, as well as a one-off settlement of the Customs’ Bills of Demand, which amounted to RM7.2 million in June last year.

Its revenue for 2020 slid 24% to RM1.76 billion compared to RM2.32 billion a year prior, impacted by the first round of MCO during which the brewer suspended its operations.

“2020 was indeed a very challenging year. The pandemic has disrupted businesses and affected people’s lives, requiring us to adapt to the new market realities. “For the first time in our history, we had to suspend production and business operations for an extended period following the government’s MCO.

“Adverse conditions in the external environment have impacted the on-trade channel in particular, while restrictions on social activities have affected consumption in general,” said Heineken MD Roland Bala.

For 4Q20, the group’s revenue per hectoliter (HL) was down 3.2% and stood at RM519 million compared to RM680 million in the same quarter a year ago.

This was a slight recovery from the plunge experienced in 2Q20, where its revenue per HL stood at RM254 million.

The group also saw a growing e-commerce performance via its Drinkies platform, which registered orders growth of 93% while revenue increased 208% YoY.

“We are proud to be the first to launch this e-commerce platform through Drinkies, and during the lockdown, a lot of people in the market said Drinkies helped them get their beer.

“At the moment, Drinkies only contribute less than 1% to our revenue, but it is growing quite fast. We hope to make this a household name in this country,” said Roland.

The group proposed a first and final single-tier dividend of 51 sen per share for the year ended Dec 31, 2020, which will be paid on July 28, 2021, to shareholders registered at the close of business on June 30, 2021.

Commenting on Heineken NV’s plans to cut about 8,000 jobs, Roland said Malaysia has been severely affected by the movement restrictions and downsizing is on the cards for the group to adapt to the new market reality.

“I have announced to our staff that we will be taking both the rightsizing of our cost base and our organisation construct. We are looking at every function and every department in terms of how we can rightsize our organisation.

“Our staff is aware of it and it will be done through a phase which I expect to be completed by the middle of the year,” he said.

Meanwhile, Carlsberg Brewery Malaysia Bhd also experienced a slowdown in operations following a seven-week suspension in Malaysia and the circuit breaker in Singapore.

Its net profit for 4Q20 declined 45% YoY to RM37.95 million from RM69 million in 4Q19, mainly due to lower sales and a one-off restructuring cost of RM9.9 million.

Revenue dropped 17.7% to RM472.54 million against RM573.92 million a year prior due to lower sales in the on-trade sector, and limited consumer-facing promotions and activities to drive consumption, amid the re-imposition of Malaysia’s Conditional MCO in mid-October and continuation of Singapore’s Phase 2 (safe transition).

For the 12-month period, net profit slid 44.3% to RM162.18 million from RM291.02 million previously.

Its revenue dropped 20.9% last year to RM1.79 billion from RM2.26 billion in 2019 due to lower sales registered in both Malaysia and Singapore. The group said in addition, there was higher trade loading in December 2019 due to the timing of the Chinese New Year in 2020.

The group declared a single-tier interim dividend of 10 sen per ordinary share. In addition, the group also proposed a final single-tier dividend of 30 sen per ordinary share.

The total declared and proposed dividends for financial year 2020 (FY20) is 40 sen per ordinary share, equivalent to RM122.3 million payment of the group’s FY20 net profit.

Group MD Stefano Clini said the group had a challenging start in 2021 as the Covid- 19 pandemic continued to impact its business operations.

In light of the reimposition of the MCO last month, the group foresees a muted recovery in on-trade sales, as well as other factors such as weak macroeconomic conditions and financial challenges.

“We are, however, hopeful that the national Covid-19 vaccination plans that are expected to start in Malaysia from end-February and have already started in Singapore will curtail Covid-19 infections and lead to better economic recovery in the second half of 2021,” Clini added.