Lion Brewery Ceylon : Annual Report 2021/22

21/22Annual Report 2021/22

O

R E W E Y ( C E Y L O N )

C

C O N T E N T S

1. Financial Highlights
2. Chairman's Message

1. Chief Executive's Review

1. Profiles of Directors

1. Senior Management Team

1. Annual Report of the Board of Directors on the Affairs of the Company

1. Audit Committee Report

1. Related Party Transactions Review Committee Report

1. Financial Calendar
2. Independent Auditor's Report

1. Statement of Financial Position

1. Statement of Profit or Loss and Other Comprehensive Income

1. Statement of Changes in Equity

1. Statement of Cash Flows

1. Notes to the Financial Statements

1. Value Added Statement

1. Five Year Summary

1. Statement of Profit or Loss and Other Comprehensive Income (Group) - USD
2. Statement of Financial Position (Group) - USD

1. Notes to the Financial Statements - USD
2. Five Year Summary - USD

1. Information to Shareholders & Investors

1. Glossary of Financial Terms
2. Notice of Meeting

1. Form of Proxy
   Corporate Information - Inner Back Cover

The report can be accessed online at http://www.carsoncumberbatch.com

F I N A N C I A L H I G H L I G H T S

In Rs. '000s	2022	2021	Change %
Revenue	58,570,885	49,849,287	17
Profit from operations	5,273,109	4,705,937	12
Profit before taxation	5,532,185	4,257,822	30
Profit after taxation	3,668,105	2,471,096	48
Shareholders' funds	19,927,661	16,974,411	17
Total assets	41,066,879	35,153,565	17
Earnings per ordinary share (Rs.)	45.85	30.89	48
Net assets per ordinary share (Rs.)	249.10	212.18	17
Market capitalisation	42,000,000	45,520,000	(8)

C H A I R M A N ' S M E S S A G E

Dear Shareholder,

I am pleased to present the Annual Report for the year ended 31st March 2022. The Chief Executive's review presents a detailed analysis of your Company's operations, and therefore my statement is confined to an overview.

During the first half of the year under review, sales were disrupted due to the 3rd wave of the Covid pandemic. In order to curb its spread, a 52 day island wide lockdown was enforced over two separate periods. Whilst some retail shops were open during this lock down period, outlets licensed to sell beer were closed, resulting in the loss of sales and cash collections. However, in the second half of the year, with increasing vaccinations

and the pandemic coming under control, the Company's operations returned to normal levels.

The rapid diminution of the country's foreign currency reserves due to a multitude of factors and the dwindling in-flow of dollars created an acute scarcity of foreign currency. This led to severe operational challenges affecting every aspect of business. Whilst its intensity was less severe in the first half of the year, its impact reached extreme proportions in the second half. Banks were compelled to prioritise the allocation of its limited foreign exchange to meet urgent and essential imports such as fuel, gas and medicines. We are extremely grateful to our suppliers for the unstinted support extended to the Company during this challenging period and in turn our commitments to them have been met in a timely manner.

The free float of the LKR in mid-March 2022 resulted in the sharp devaluation of the Rupee, with the US$ appreciating to Rs.370/- by April 2022. This steep depreciation combined with

other economic factors has led to very high head line and core inflation, resulting in significant price increases across all inputs. In parallel, various geopolitical events have led to a considerable rise in global commodity prices. Aluminum which is a key ingredient in the manufacture of cans is one such commodity that experienced a steep rise in prices. The surge in global freight rates too caused the cost of imported inputs to increase significantly. In spite of increases in the price of the Company's product range to counter rising costs, gross margins suffered.

In this challenging and demanding backdrop the Company delivered a profit before tax of

Rs. 5.5 billion compared to Rs.4.2 billion last year, on a turnover of Rs.58.6 billion versus

Rs. 49.8 billion in the previous year. It must be noted that the sharp appreciation of the US$ in March 2022 resulted in a substantial exchange gain; without this benefit, the profit before tax for the year would be Rs.4.9 billion. For the financial year 2021/22, the Company paid Rs.47 billion as Government taxes compared to Rs.37 billion last year.

Exports performed well recording a growth of 45% over the previous year despite the many operational challenges. The income received from exports greatly helped overcome the foreign exchange challenges faced during the year. If not for the numerous impediments, growth in exports would have been much higher. The lack of ships calling at the port of Colombo compounded by the scarcity of containers, hampered shipments and significantly increased freight costs. Export profitability was also challenged by rising costs of raw materials. The international business arm of the Company now exporting to around 26 countries, offers further promise and potential for growth in the years to come and will receive due focus.

2 Lion Brewery (Ceylon) PLC

The forthcoming year will be one of even greater challenges. As the country gears itself to overcome the economic, political and social crisis, consumers and businesses will have to brace themselves to steer through a period of severe turbulence. The significant changes in monetary policy already in motion will lead to significantly higher interest costs and liquidity issues, while increasing inflation will lead to higher prices that will impact demand. It

is expected that the ongoing shortage in foreign exchange, the scarcity of fuel, interruptions to power supply, disruptions to global supply chains hampering supplies and rising commodity prices will continue to impede business in the forthcoming year. In addition, the expected revisions to fiscal policies will result in the increase of VAT and other taxes, adding to the challenges. Nevertheless,

as proven in the past, guided by the Board, your Company's capable Management assisted by the diligent team of employees is committed towards overcoming the challenges to ensure business success.

Despite having to face numerous personal hardships and a multitude of business challenges, our dedicated team of employees across all levels has ensured that the Company's operations continued uninterrupted. The Company is deeply appreciative of the commitment and contribution of every employee and extends its grateful thanks to all team members.

A special thank you and a note of appreciation to our partners Carlsberg, our bankers, consignment agents and suppliers for the unstinted help and assistance provided. Also, a big thank-you to all our loyal consumers for the continued trust and confidence placed in the Company's brands.

The forthcoming year will be one of even greater challenges. As the country gears itself to overcome the economic, political and social crisis, consumers and businesses will have to brace themselves to steer through a period of severe turbulence.

In conclusion, I wish to express my appreciation and thanks to the Audit Committee, Remuneration Committee, Related Party Committee and Nominations Committee and to my colleagues on the Board for their invaluable advice and guidance provided to steer the Company. As always, I look forward to working closely with all in taking Lion further and forward.

(Sgd.)

D. A. Cabraal

Chairman

Colombo

08th July 2022

Annual Report 2021/22

3