Carlsberg expects worse lockdown impact this year

By S BIRRUNTHA / TMR FILE PIX

CARLSBERG Brewery (M) Bhd expects the prolonged suspension of its operations since June in Malaysia will have a severe impact on its earnings. 

MD Stefano Clini said the operational disruption is unprecedented in the group’s history and cautioned the full effects were only partially evident in the second quarter ended June 30, 2021 (2Q21), because the suspension was imposed from the last month of the quarter. 

“The Full Movement Control Order (FMCO) in June was the second time our brewery operations were suspended since the first MCO in March 2020. 

“Last year, we faced a seven-week disruption and this time our operations were suspended for 11 weeks. 

“Due to the prolonged suspension, we were not able to adequately satisfy domestic market demand, maintain its regular supply to the Singapore market, as well as meet export demand from regional and other foreign markets,” Clini said in a virtual media briefing last Friday. 

He said the brewer group was pleased that its production and logistics department were allowed to resume operations at 100% capacity on Aug 16, following the leeway permitted to the manufacturing sector with a high vaccinated workforce. 

He said over 80% of the employees had been fully vaccinated. 

Nevertheless, Clini said the lockdown in Malaysia has led to illicit beer trade to proliferate. 

As a result, he said the group’s export revenue and associated taxes would be severely impacted, besides its position as an international investor if regional customers permanently switch to alternative sources from other countries.

He added that illicit products would cause further tax losses and serious public health risks for the country.

Therefore, he said the group is hopeful the government would not impose further increases on excise duties in the upcoming Budget 2022 Budget, slated to be tabled in October, to lessen the burden of recovery on food and beverage businesses and retailers who rely on beer as an important source of income. 

Carlsberg’s 2Q21 net profit more than tripled year-on-year to RM37.14 million from RM10.65 million for the corresponding period last year. 

Quarterly revenue gained 21.6% to RM349.21 million from RM287.27 million made a year ago for the same quarter. 

The group attributed the higher earnings and revenue to improved overall sales in Malaysia and Singapore. 

Revenue from Malaysian operations increased by 17.1% to RM243.6 million following the gradual easing of lockdown measures in the early 2Q and driven by new pro- duct launches. 

The growth was, however, hampered when the FMCO was imposed in June. Sales in Singa- pore increased by 33.3% to RM105.6 million due to the easing of restrictions and the re-opening of dining-in during the quarter. 

The group’s earnings per share increased to 12.15 sen from 3.48 sen previously. 

For six months, Carlsberg’s net profit grew 23.9% to RM103.59 million, while revenue only rose 0.5% to RM881.2 million. 

The group has declared a single-tier interim dividend of 10 sen per share on account of the “relatively reasonable” performance in 2Q21. Clini said the board remains focused on preserving cash and liquidity in the near- to medium-term.

He added that the group is confident its long-term strategies are well placed to manage the risks of the current landscape. 

“We are hopeful the situation will show steady improvement. Nevertheless, the ongoing pandemic restrictions, albeit in phases, will continue to adversely impact the group’s revenue and profitability until more of the economy is able to open,” he said. 

He also said that the group will continue to review its business strategies to ensure its structures, processes and cost base are suited to a post-Covid-19 reality. 

Carlsberg shares ended 1.67% higher to RM21.90 last Friday, valuing the company RM6.7 billion.