"Beer sector progress below expectations"
Budget promise of liberalized soft alcohol retailing not kept says brewers

Sri Lanka’s oldest brewing company, the Ceylon Brewery Limited, has complained that while the country’s economy had shown a steady upward trend, "the progress within the beer sector has failed to keep up to expectations."

Despite this grumble, both the Ceylon Brewery Ltd. and its subsidiary, Lion Brewery Ceylon Ltd., have shown increases in both revenue and profits during the half-year ended Sept. 30, 2003. These improvements in performance have been attributed to a price increase at the beginning of the year rather than volume growth.

The Ceylon Brewery group dominates the country’s beer industry. While the old established Ceylon Brewery, now acts as a holding company having closed down its Nuwara Eliya brewery, its subsidiary Lion Brewery Ceylon Ltd. is the country’s biggest brewer owning a state-of-the-art facility at the Biyagama FTZ.

Lion has posted revenue growth of 14% to Rs. 1.24 billion in the half-year ended September 30, 2003, while profits after tax were up up 9% to Rs. 205.7 million. The company has no tax obligation as it is still within its tax holiday period.

"The fact that volume growth is below expectations underlines the fundamental issue faced by the beer industry; Sri Lanka is a hard alcohol market dominated by illegal spirits and will remain so until such time modern and pragmatic alcohol policies are implemented," Carsons Management Services (Pvt.) Ltd., the managers of both CBL and Lion said.

Lion had increased capacity during the second quarter of the current financial year by installing four new fermenters increasing its total capacity by over 20% to 550,000 hl per annum.

Carsons Managements said that this is Lion’s second expansion since it commenced operations a few years ago and had been done in anticipation of the liberalization of soft alcohol retailing consequent to announcements made in the previous budget.

"However, these reforms are yet to be implemented," they grumbled.

Ceylon Brewery now operates as a holding company having closed down its Nuwara Eliya Brewery last year. At company level CBL had seen half year revenues up 53% to Rs. 127.1 million during the period under review and an after-tax profit of Rs. 114.1 million, up 53% from a year earlier.

The Ceylon Brewery which had net assets of Rs. 40.58 as at September 30, 2003, up from Rs. 36.83 a year earlier with group net assets stated at Rs. 54.23, up from Rs. 47.09 in the middle of the last financial year.

The Ceylon Brewery share traded at a high of Rs. 105 and a low of Rs. 75 during the period under revenue against a trading range of Rs. 85 to Rs. 35 a year earlier.

Lion Brewery which had net assets per share of Rs. 32.11 as at September 30, 2003, up from Rs. 29.25 a year earlier saw its share trading at a high of Rs. 88.75 and a low of Rs. 65 during the half year under review. This compared with a trading range of Rs. 75.25 to Rs. 44 a year earlier.

Both the Ceylon Brewery and its subsidiary are Carson Cumberbatch companies.