Lion Brewery Ceylon : Interim Financials 30 Sep 2022

Lion Brewery (Ceylon) PLC

Interim Condensed Financial Statements for the Second Quarter ended

30 th September 2022

LION BREWERY (CEYLON) PLC

Review

The economic crisis continues to have an impact on the quarter under review. High interest rates and inflation compounded by the fuel and electricity crisis brought about a challenging environment which had a considerable impact on operations. A series of tax increases further stretched consumer affordability. The business experienced significant cost inflation with our raw material basket inflating by over 100%. A new import tax was introduced on our key raw material which further increased our cost base. Furthermore, the increases in fuel and electricity prices also had significant negative impacts on the business. These tax and cost increases resulted in consumer pricing increasing in excess of 60% so far, which is well in excess of wage growth. Despite the difficult conditions, the company continued investing behind capabilities and brands with overhead expenses increasing by LKR 650m over the prior year. Cash flow was strained due to increased working capital requirements and capital expenditure costs.

Despite the pressures on the business, we delivered substantial tax growth to Government in calendar year 2022. Estimated total taxes paid by Lion Brewery in 2022 will increase by 60% to c. LKR 60bn. This tax growth is driven primarily by excise, VAT and SSL increases. Had the increases been implemented on January 1st, total tax growth would have been even higher. The beer industry did not benefit from the 2019 VAT reduction as it was implemented in a tax neutral manner by simultaneously increasing excise taxes. As a result, the increases this year have been entirely incremental to government revenue.

The outlook for the rest of the year is negative as the cumulative effect of the economic depression takes hold. This will be compounded by a steep increase in personal income taxes which will reduce take home pay. Following the Government's successful efforts to restore regular gas and fuel supplies, supply of illicit alcohol has also resumed. As beer prices have significantly outpaced wage growth, consumers are seeking out cheaper alternatives. As such, continued volume loss to the legal industry is to be expected. No relief is expected on the cost front.

LION BREWERY (CEYLON) PLC

BOARD OF DIRECTORS AS AT 30TH SEPTEMBER 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	30‐Sep‐22		31‐Mar‐22	30‐Sep‐22		31‐Mar‐22
		(Audited)			(Audited)
ASSETS
Non‐ Current Assets
Property, plant & equipment	19,237,373		18,829,387	20,942,568		20,542,588
Right of use assets	174,584		151,914	174,584		151,914
Intangible assets	392,278		750,093	392,278		750,093
Investments in subsidiary	1,029,623		1,029,623	‐		‐
Total Non‐Current Assets	20,833,858		20,761,017	21,509,430		21,444,595
Current Assets
Inventories	4,436,291		4,438,517	4,436,291		4,438,517
Trade and other receivables	4,446,106		1,791,119	4,451,720		1,796,357
Amounts due from related companies	361,165		374,178	361,165		374,178
Cash and cash equivalents	11,493,527		12,889,986	11,630,453		13,013,232
Total Current Assets	20,737,089		19,493,800	20,879,629		19,622,284
Total Assets	41,570,947		40,254,817	42,389,059		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	16,904,494		15,657,552	16,556,239		15,297,757
Total Equity	20,930,165		19,683,223	21,186,143		19,927,661
Non‐ Current Liabilities
Loans and borrowings	1,968,607		2,300,311	1,968,607		2,300,311
Lease creditor (Note 04)	187,183		160,546	187,183		160,546
Employee benefits	182,148		173,704	182,148		173,704
Net deferred tax liabilities	4,490,396		4,660,920	5,050,358		5,225,626
Total Non‐ Current Liabilities	6,828,334		7,295,481	7,388,296		7,860,187
Current Liabilities
Trade and other payables	3,460,283		3,234,345	3,460,200		3,235,794
Amounts due to related companies	317,765		155,756	317,765		155,756
Refundable deposits	2,536,784		2,301,181	2,536,784		2,301,181
Current tax liabilities	2,925,098		3,116,118	2,927,353		3,117,587
Loans and borrowings	3,087,526		3,347,696	3,087,526		3,347,696
Lease creditor (Note 04)	24,556		24,531	24,556		24,531
Bank overdrafts	1,460,436		1,096,486	1,460,436		1,096,486
Total Current Liabilities	13,812,448		13,276,113	13,814,620		13,279,031
Total Liabilities	20,640,782		20,571,594	21,202,916		21,139,218
Total Equity and Liabilities	41,570,947		40,254,817	42,389,059		41,066,879
Net assets per ordinary share (Rs.)	261.63		246.04	264.83		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
11th November 2022

LION BREWERY (CEYLON) PLC

CONDENSED STATEMENT OF COMPREHENSIVE INCOME ‐ COMPANY

In Sri Lankan Rs.'000s		Quarter Ended		Change		Six Months Ended		Change		Year Ended
		30.09.2022	30.09.2021	%		30.09.2022	30.09.2021	%		31.03.2022
														(Audited)
Revenue	25,002,496	11,205,449	123		46,313,114	21,762,587	113	58,570,885
Cost of sales	(18,965,350)	(9,245,694)	105		(35,714,643)	(17,767,834)	101	(47,520,726)
Gross profit		6,037,146		1,959,755		208		10,598,471		3,994,753		165		11,050,159
Other income	53,992	42,385	27		124,585	74,948	66	189,598
		6,091,138		2,002,140		204		10,723,056		4,069,701		163		11,239,757
Distribution expenses	(1,314,832)	(491,023)	168		(2,394,810)	(1,141,327)	110	(2,865,746)
Administrative expenses	(612,138)	(585,391)	5		(1,123,741)	(975,276)	15	(2,122,587)
Other expenses	(171,424)	(91,894)	87		(504,849)	(200,075)	152	(480,695)
Impairment of intangible assets	‐		‐		‐	(353,229)		‐	100	(463,578)
Operating profit before finance cost		3,992,744		833,832		379		6,346,427		1,753,023		262		5,307,151
Finance income		336,064	157,275	114		622,341		298,175	109	644,827
Finance costs	(819,191)	(245,484)	234		(889,942)	(453,335)	96	(389,793)
Net finance income /(cost)		(483,127)		(88,209)		448		( 267,601)		( 155,160)		72		255,034
Profit before taxation		3,509,617		745,623		371		6,078,826		1,597,863		280		5,562,185
Income tax expense		(1,252,048)		(254,152)		393		(2,428,444)		(557,901)		335		(2,214,371)
Deferred taxation	(87,404)	70,672	(224)		170,524	136,206	25	347,440
Profit after taxation		2,170,165		562,143		286		3,820,906		1,176,168		225		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		2,170,165		562,143		286		3,820,906		1,176,168		225		4,237,614
Earnings per ordinary share (Rs.)	27.13	7.03				47.76	14.70			46.19

The above figures are provisional and subject to audit.