Lion Brewery Ceylon : Interim Accounts 31 Dec 2022

Lion Brewery (Ceylon) PLC

Interim Condensed Financial Statements for the Third Quarter ended

31 st December 2022

LION BREWERY (CEYLON) PLC

Review

The quarter under review saw the first glimpses of the slowing down of inflation, but the high prices had an overall impact on purchasing power of consumers which resulted in the overall FMCG volumes in Sri Lanka being impacted. The beer industry witnessed a 77% increase in prices driven by Excise Duty, VAT and SSL taxes during the period leading up to January resulting in volumes declining for the quarter compared to the previous year.

The situation has deteriorated in January following the 20% increase in excise taxes. We are witnessing an exponential growth of 'Kasippu" (moonshine), illicit arrack and illicit toddy as the prices of legal alcoholic beverages are out of consumers' reach.

Early signs are that the January excise tax increase is struggling. January excise tax collection has declined in excess of 10% year‐on‐year. The situation looks worse in February. Six weeks into the year, the full year excise tax target seems difficult to achieve. Indeed, at the current run‐rate, the jury is out on whether 2023 taxes will even reach the 2022 amount.

Policy makers should be cognizant of the fact that tax hikes on the Alcohol industry, an industry with a large illicit component, will be counterproductive in the current depressed conditions as volume declines offset duty increases, thereby impacting this steady source of revenue to Government. If there is a decline in excise taxes year‐on‐year of over 10% , even after a 20% increase in tax rates, then it would appear that we are past the point of optimal taxation.

In the face of this, we strongly advocate for sensible taxation and allow time for consumer earnings power to recover.

With the domestic business under pressure for the foreseeable future, the company is increasing its already high focus on international business. Spend behind product, brand, distribution and people is increasing. Returns on this spend are not only uncertain but will take time to materialize.

Despite efforts to manage costs, given continuing cost inflation and declining domestic volumes, profitability will be subdued.

The amalgamation of Pearl Springs (Private) Limited with Lion Brewery (Ceylon) PLC was completed on 31st Jan 2023 to optimize the corporate structure.

LION BREWERY (CEYLON) PLC

BOARD OF DIRECTORS AS AT 31ST DECEMBER 2022

Mr. D. A. Cabraal (Chairman)

Mr. H. Selvanathan (Deputy Chairman)

Mr. R. H. Meewakkala (CEO/Director) Mr. D. C. R. Gunawardena

Mr. K. Selvanathan (Director / Alternate Director to H. Selvanathan) Mr. D. R. P. Goonetilleke

Mrs. S. J. F. Evans

Mr. S. Selvanathan Mr. S. Clini

Ms. V. Gun

LION BREWERY (CEYLON) PLC

CONDENSED STATEMENT OF FINANCIAL POSITION

		Company	Group
	In Rs.'000s	31‐Dec‐22	31‐Mar‐22	31‐Dec‐22		31‐Mar‐22
		(Audited)			(Audited)
	ASSETS
	Non‐ Current Assets
	Property, plant & equipment	19,387,120	18,829,387	21,088,512		20,542,588
	Right of use assets	165,150	151,914	165,150		151,914
	Intangible assets	389,329	750,093	389,329		750,093
	Investments in subsidiary	1,029,623	1,029,623	‐		‐
	Total Non‐Current Assets	20,971,222	20,761,017	21,642,991		21,444,595
	Current Assets
	Inventories	7,341,468	4,438,517	7,341,468		4,438,517
	Trade and other receivables	10,926,806	1,791,119	10,930,043		1,796,357
	Amounts due from related companies	381,298	374,178	380,411		374,178
	Cash and cash equivalents	12,182,865	12,889,986	12,324,412		13,013,232
	Total Current Assets	30,832,437	19,493,800	30,976,334		19,622,284
	Total Assets	51,803,659	40,254,817	52,619,325		41,066,879
	EQUITY AND LIABILITIES
	Equity
	Stated capital	2,537,801	2,537,801	2,537,801		2,537,801
	Capital reserves	1,487,870	1,487,870	2,092,103		2,092,103
	Retained earnings	17,886,050	15,657,552	17,536,337		15,297,757
	Total Equity	21,911,721	19,683,223	22,166,241		19,927,661
	Non‐ Current Liabilities
	Loans and borrowings	1,949,094	2,300,311	1,949,094		2,300,311
	Lease creditor (Note 04)	180,856	160,546	180,856		160,546
	Employee benefits	184,126	173,704	184,126		173,704
	Net deferred tax liabilities	4,544,638	4,660,920	5,102,603		5,225,626
	Total Non‐ Current Liabilities	6,858,714	7,295,481	7,416,679		7,860,187
	Current Liabilities
	Trade and other payables	6,398,967	3,234,345	6,400,044		3,235,794
	Amounts due to related companies	48,293	155,756	48,293		155,756
	Refundable deposits	2,677,762	2,301,181	2,677,762		2,301,181
	Current tax liabilities	3,712,795	3,116,118	3,714,899		3,117,587
	Loans and borrowings	7,062,503	3,347,696	7,062,503		3,347,696
	Lease creditor (Note 04)	24,708	24,531	24,708		24,531
	Bank overdrafts	3,108,196	1,096,486	3,108,196		1,096,486
	Total Current Liabilities	23,033,224	13,276,113	23,036,405		13,279,031
	Total Liabilities	29,891,938	20,571,594	30,453,084		21,139,218
	Total Equity and Liabilities	51,803,659	40,254,817	52,619,325		41,066,879
	Net assets per ordinary share (Rs.)	273.90	246.04	277.08		249.10
	The above figures are provisional and subject to audit.
	These financial statements are in compliance with the requirements of the Companies Act No. 07 of 2007.
	(Sgd.)
	J.N. Goonaratne
	Deputy Chief Financial Officer
	The Board of Directors is responsible for the preparation and presentation of these Financial Statements.
	Approved and signed on behalf of the Managers		Approved and signed on behalf of the Board
	(Sgd.)	(Sgd.)		(Sgd.)
	V. R. Wijesinghe	R.H. Meewakkala		D.R.P. Goonetilleke
	Director	Director		Director
	Carsons Management Services (Private) Limited

10th February 2023

LION BREWERY (CEYLON) PLC

CONDENSED STATEMENT OF COMPREHENSIVE INCOME ‐ COMPANY

In Sri Lankan Rs.'000s		Quarter Ended		Change		Nine Months Ended		Change		Year Ended
		31.12.2022	31.12.2021		%		31.12.2022	31.12.2021	%		31.03.2022
														(Audited)
Revenue	23,793,779	17,790,862	34		70,106,893	39,553,449	77	58,570,885
Cost of sales	(17,874,465)	(14,346,440)	25		(53,589,108)	(32,114,274)	67	(47,520,726)
Gross profit		5,919,314		3,444,422		72		16,517,785		7,439,175		122		11,050,159
Other income	91,793	55,509	65		216,378	130,457	66	189,598
		6,011,107		3,499,931		72		16,734,163		7,569,632		121		11,239,757
Distribution expenses	(1,598,098)	(718,854)	122		(3,992,908)	(1,860,182)	115	(2,865,746)
Administrative expenses	(667,047)	(595,605)	12		(1,790,788)	(1,570,881)	14	(2,122,587)
Other expenses	(191,946)	(124,811)	54		(696,795)	(324,885)	114	(480,695)
Impairment of intangible assets	‐		‐		‐	(353,229)		‐	100	(463,578)
Operating profit before finance cost		3,554,016		2,060,661		72		9,900,443		3,813,684		160		5,307,151
Finance income		423,034	141,771	198		1,045,375	439,946	138	644,827
Finance costs	(981,612)	(242,975)	304		(1,871,554)	(696,310)	169	(389,793)
Net finance income /(cost)		(558,578)		(101,204)		452		( 826,179)		( 256,364)		222		255,034
Profit before taxation		2,995,438		1,959,457		53		9,074,264		3,557,320		155		5,562,185
Income tax expense		(871,639)		(732,413)		19		(3,300,084)		(1,290,314)		156		(2,214,371)
Deferred taxation	(54,242)	592	(9,263)		116,282	136,798	(15)	347,440
Profit after taxation		2,069,557		1,227,636		69		5,890,462		2,403,804		145		3,695,254
Other comprehensive income
Items that will not be reclassified to profit or loss
Remeasurement of employee benefit obligations	‐		‐		‐	‐		‐		‐	45,763
Deferred tax charge on actuarial gain	‐		‐		‐		‐		‐		‐		(18,305)
Revaluation gain on land & buildings	‐		‐		‐		‐		‐		‐		858,170
Deferred tax charge on land and building revaluation	‐		‐		‐		‐		‐		‐		(343,268)
Total other comprehensive income for the period net of tax	‐		‐		‐		‐		‐		‐		542,360
Total comprehensive income for the period		2,069,557		1,227,636		69		5,890,462		2,403,804		145		4,237,614
Earnings per ordinary share (Rs.)	25.87	15.35				73.63	30.05			46.19

The above figures are provisional and subject to audit.