Sri Lankan beer company profits down

Mar 04, 2009 (LBO) – Sri Lanka’s Lion Breweries December quarter profits have taken a hit from increased finance costs on loans taken to raise fresh capital and secure their 22.5 percent stake in Indian brewer, South Asian Breweries (SAB), analysts said.

However, when a preference dividend of 32.8 million rupees is deducted, Lion Breweries actually made a loss of 15 million rupees in the first nine months, against an 86.4 million profit during the same period last year.

Preference shares could receive either a fixed or floating rate of return which would be given priority over the common stock holders.

Financing costs for the nine months had galloped by 88 percent to 294.3 million rupees.

Tax expenses for the nine months have increased by 327 percent to 8.7 million.

Sri Lanka customs has filed a case against Lion Breweries for the recovery of 58.7 million rupee in excise duty special provision payable which has been in dispute since 2003, said Lion Breweries.

“This amount comprises of the disputed Excise Duty Special Provision of 29.4 million rupees and a penalty of 29.4 million.”

“In the event the Courts hold in favour of the Sri Lanka Customs, the company will have to pay the required amount as directed. No provision has been made in the books of accounts of the company as at December 31, 2008.”

Revenue for the first nine months had increased by 22 percent or 816 million rupees, to 4.51 billion.

December quarter profits fell by 34 percent or 20.3 million rupees, to 39.6 million.

“The SAB stake was financed through borrowings,” an analyst said.

“Interest rates were high throughout last year and the present fall in inflation will only ease up the interest rates in the next few months.”

Financing costs during the December quarter had jumped by 78 percent or 47.1 million rupees, to 107.2 million, according to a company stock exchange filing.

Distribution costs had spiked up by 24 percent to 323.6 million rupees.

However December quarter revenues had increased by 20 percent to or 282 million rupees, to 1.68 billion.

Profits for the first nine months plunged 85 percent or 101.4 million rupees, to 17 million.