Lion Brewery Ceylon : Interim Financial Statements as of 31-12-2021

Lion Brewery (Ceylon) PLC

Interim Condensed Financial Statements for the Third Quarter ended

31st December 2021

LION BREWERY (CEYLON) PLC

Review

For the 9 months ended 31st December 2021, a profit after tax of Rs. 2.4 billion was earned on a turnover of Rs. 39.5 billion, compared to previous years comparatives of Rs.2.0 billion & Rs.35.1 billion respectively. In the 3rd quarter, the business environment returned to near normal levels, with sales benefitting from a re‐stocking after closure in Q2. This was a result of the Government's initiative to keep the Country open, notwithstanding the simmering Covid pandemic which pervaded during that period. This provided an opportunity for society to acclimatize to the new ways of engaging in their daily activities. During this period, the authorities commenced administering the booster vaccine, which provided protection from serious health implications, caused by contracting Covid. The Government's initiative of opening the borders also bore dividend, as the country saw an increased number of tourists in the quarter under consideration, which supported volumes, especially in touristic pockets.

The overall cost escalations continued to exert pressure on margins, whilst the November budget, also increased the excise duty on beer. As a result, the Company was compelled to revise the prices of beer. In addition to the increase in excise duty, the budget also announced two new taxes namely, a surcharge tax on taxable income of the financial year 20/21 of 25% & a social security contribution tax of 2.5% on turnover which is to be effective from 1st April 2022. The exact methodology of their enactment is yet being worked out. These two taxes are in addition to the special goods & services tax in lieu of excise duty, as was announced in the previous year's budget, which too remains to be enacted.

In the month of December, the Company added Guinness to its existing brand portfolio. Guinness was first brewed at the St. James's Gate Brewery in Dublin, Ireland in 1759 by Arthur Guinness. Guinness is now a part of Diageo. The group's association with Guinness, dates back to the late twentieth century, when Guinness was brewed at the Nuwara Eliya brewery, until its closure in 2001. Guinness offers the consumer a unique perfectly balanced super‐premium dark beer, rich & creamy, distinctly black, velvety in finish and with a warming mouthfeel.

During the quarter under review, all Covid 19 protocols continued to be stringently followed within the brewery, to ensure undisrupted operations. Proactive operational measures taken by the Company enabled it to navigate within this fluid and changing operating environment. During the period ending 9 months, the Company paid to the Government Rs. 26.0 billion as Excise Duty and other taxes.

Exports volumes recorded a growth of 65%, in comparison to the corresponding period last year. Although this performance could be considered good, exports fell below potential, due to the inability to find vessels to carry our cargo. The number of vessels calling in at the port of Colombo reduced substantially, resulting in difficulties to obtain space for our cargo whilst also causing substantial increases in the freight rates. Export margins remained under pressure.

The forex crisis has created a shortage of dollars required to pay for imports of raw material & other inputs for manufacturing. Of the limited dollars available, banks give preference for payments towards import of fuel, medicine & other essential food items. It is fervently hoped that this issue gets resolved quickly as businesses are compelled to manage on a "hand to mouth" focus on a daily basis.

Few factors will determine the immediate future. The most significant is the way in which Sri Lankans respond to the Covid pandemic. If the booster vaccine is received across the population, and if necessary precautions are taken by all concerned, the health complications arising by contracting Covid will greatly reduce. The other factor is the availability of Dollars for the import of raw & other material required to ensure continued operations. Apart from these, with the reduction in disposable incomes, the authorities should be cognizant that there is every possibility for the illicit alcohol industry to thrive, which will have an impact on the legal alcobev industry. Growth in illicit trade will significantly impact government revenue from the legal alcobev industry, which is budgeted at circa Rs 200 billion this year. It should also be reiterated that increasing the outlet base, through streamlining the license process, would be a longer‐ term solution to minimize threat to government tax revenues, whilst reducing the harmful impact of low‐quality illegal products.

LION BREWERY (CEYLON) PLC

BOARD OF DIRECTORS AS AT 31ST DECEMBER 2021

Mr. D. A. Cabraal (Chairman)

Mr. H. Selvanathan (Deputy Chairman)

Mr. R. H. Meewakkala (Chief Executive Officer ‐ appointed w.e.f. 01/07/2021) 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

Mr. S. K. Shah (Chief Executive Officer ‐ retired w.e.f. 30/06/2021)

LION BREWERY (CEYLON) PLC

CONDENSED STATEMENT OF FINANCIAL POSITION

	Company		Group
In Rs.'000s	31‐Dec‐21		31‐Mar‐21	31‐Dec‐21		31‐Mar‐21
		(Audited)			(Audited)
ASSETS
Non‐ Current Assets
Property, plant & equipment	17,947,657		17,408,326	19,349,541		18,819,887
Right of use assets	140,240		164,119	140,240		164,119
Intangible assets	1,215,767		1,225,109	1,215,767		1,225,109
Investments in subsidiary	1,029,623		1,029,623	‐		‐
Total Non‐Current Assets	20,333,287		19,827,177	20,705,548		20,209,115
Current Assets
Inventories	3,341,852		3,493,117	3,341,852		3,493,117
Trade and other receivables	2,043,226		1,334,241	2,048,410		1,340,316
Amounts due from related companies	387,187		445,619	387,187		445,619
Cash and cash equivalents	11,234,609		9,525,907	11,360,595		9,665,398
Total Current Assets	17,006,874		14,798,884	17,138,044		14,944,450
Total Assets	37,340,161		34,626,061	37,843,592		35,153,565
EQUITY AND LIABILITIES
Equity
Stated capital	2,537,801		2,537,801	2,537,801		2,537,801
Capital reserves	972,968		972,968	1,388,475		1,388,475
Retained earnings	14,338,185		13,380,781	13,981,947		13,048,135
Total Equity	17,848,954		16,891,550	17,908,223		16,974,411
Non‐ Current Liabilities
Loans and borrowings	2,664,677		3,497,060	2,664,677		3,497,060
Lease creditor (Note 04)	147,815		165,321	147,815		165,321
Employee benefits	224,244		233,933	224,244		233,933
Net deferred tax liabilities	4,509,988		4,646,786	4,951,727		5,088,525
Total Non‐ Current Liabilities	7,546,724		8,543,100	7,988,463		8,984,839
Current Liabilities
Trade and other payables	2,260,481		1,873,132	2,261,540		1,874,996
Amounts due to related companies	120,887		123,342	120,887		122,828
Refundable deposits	2,201,013		1,900,393	2,201,013		1,900,393
Current tax liabilities	1,335,777		2,383,576	1,337,141		2,385,113
Loans and borrowings	4,200,732		1,868,664	4,200,732		1,868,664
Lease creditor (Note 04)	22,925		19,900	22,925		19,900
Bank overdrafts	1,802,668		1,022,404	1,802,668		1,022,421
Total Current Liabilities	11,944,483		9,191,411	11,946,906		9,194,315
Total Liabilities	19,491,207		17,734,511	19,935,369		18,179,154
Total Equity and Liabilities	37,340,161		34,626,061	37,843,592		35,153,565
Net assets per ordinary share (Rs.)	223.11		211.14	223.85		212.18

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

Financial Controller‐Corporate

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
11th February 2022

LION BREWERY (CEYLON) PLC

CONDENSED STATEMENT OF COMPREHENSIVE INCOME ‐ COMPANY

In Sri Lankan Rs.'000s		Quarter Ended		Change		Nine Months Ended		Change		Year ended
		31.12.2021	31.12.2020	%		31.12.2021	31.12.2020	%		31.03.2021
														(Audited)
Revenue	17,790,862	13,553,331	31		39,553,449	35,082,412	13	49,849,287
Cost of sales	(14,119,259)	(10,930,647)	29		(31,583,149)	(28,253,051)	12	(39,828,971)
Gross profit		3,671,603	2,622,684		40		7,970,300	6,829,361		17		10,020,316
Other income		55,509		33,668		65		130,457		95,694		36		331,241
Distribution expenses	3,727,112		2,656,352		40		8,100,757		6,925,055		17		10,351,557
(845,095)	(718,772)	18		(2,237,967)	(1,957,685)	14	(2,815,812)
Administrative expenses	(595,605)	(424,174)	40		(1,570,881)	(1,097,505)	43	(1,617,768)
Other expenses	(225,751)	(146,817)	54		(478,225)	(355,897)	34	(562,558)
Impairment of intangible assets	‐		‐		‐	‐		‐		‐	(449,084)
Operating profit before finance cost		2,060,661		1,366,589		51		3,813,684		3,513,968		9		4,906,335
Finance income		141,771	137,022	3		439,946		566,716	(22)	688,286
Finance costs	(242,975)	(225,962)	8		(696,310)	(971,958)	(28)	(1,143,396)
Net finance costs		(101,204)	(88,940)		14		( 256,364)		( 405,242)	(37)	( 455,110)
Profit before taxation	1,959,457	1,277,649	53		3,557,320	3,108,726	14	4,451,225
Income tax expense		(732,413)		(476,522)		54		(1,290,314)		(1,170,408)		10		(1,815,068)
Deferred taxation	592	(10,966)	(105)		136,798	23,063	493	(43,743)
Profit after taxation		1,227,636		790,161		55		2,403,804		1,961,381		23		2,592,414
Other comprehensive income
Items that will not be reclassified to profit or loss
Remeasurement of employee benefit obligations	‐		‐		‐	‐		‐		‐	1,119
Deferred tax charge on actuarial gain	‐		‐		‐		‐		‐		‐		(447)
Total other comprehensive income for the period net of tax	‐		‐		‐		‐		‐		‐		672
Total comprehensive income for the period		1,227,636		790,161		55		2,403,804		1,961,381		23		2,593,086
Earnings per ordinary share (Rs.)	15.35	9.88				30.05	24.52			32.41
The above figures are provisional and subject to audit