Carlsberg MY expects 'adverse impact' on revenue and profit after unprecedented shutdown

Carlsberg Brewery Malaysia saw the revenue for its Malaysia operations improve by 17.1% to RM243.6 million during the second quarter of 2021 (Q2 2021), while profit from operations was up 217.9% to RM38.0 million against the same quarter last year. Revenue for the first half of this year (H1 2021), however, fell 8.2% to RM600.2 million while profit from operations rose by 16.1% to RM100.1 million compared to the same period last year.

According to Carlsberg, the easing of restrictions in Malaysia earlier this year during the Movement Control Order (MCO) 2.0 allowing dine-in F&B operations coupled with new product and packaging launches helped deliver growth for the second quarter. However, the re-imposition of MCO 3.0 on 12 May suspending dine-in and the subsequent full MCO (FMCO) on 1 June which resulted in the full suspension of brewery operations "took a toll on" revenue for the quarter, which was partially mitigated by the Group’s cost controls. Profitability for Q2 2021 was enhanced by the continuous improvement in cost control and the absence of the one-off RM6.4 million bill-of-demand settlement paid last year to the Royal Malaysian Customs of Selangor, Carlsberg said.

Although the group recommenced its Malaysia operations on 16 August, it said in the financial statement that the extended brewery suspension from 2 June until then, and the still ongoing dine-in restrictions in the on-trade sector, has and will continue to adversely impact the Group’s revenue and profitability until more of the economy is open. MD Stefano Clini said the FMCO in June was the second time its brewery operations were suspended since national lockdowns began in March 2020. Last year, the company also faced a seven-week disruption and this time its operations were suspended for 11 weeks.

According to him, the suspension of operations is "unprecedented in the history of the Group with severe impacts to its business where the full effects were only partially evident in Q2 2021 as the suspension was imposed from the last month of the quarter.

“The prolonged suspension in Malaysia has constituted a major impediment to the ability of the Group to carry on its normal business operations since June, including not being able to adequately satisfy domestic market demand, maintain its regular supply to the Singapore market, as well as meet export demand from regional and other foreign markets," he explained. However, its operations are allowed to now operate at full capacity in phases one and two as more than 80% of its employees are fully vaccinated. 

Nonetheless, the Group has expressed its concerns for the lockdown in Malaysia, which it said has led to the proliferation of the illicit beer trade, resulting in further tax losses and serious public health risks. This has also had a "severe impact" on the Group's export revenue, associated taxes, and can potentially impact its position as an international investor if the Group’s regional customers permanently switch to alternative sources from other countries, Carlsberg said.

Meanwhile, as the lockdown duration and restrictions were less severe in Singapore compared to Malaysia, the Group's operations in Singapore saw revenue growth of 25.6% to RM281.0 million whilst profit from operations increased by 50.9% to RM29.1 million for H1 2021 compared to the same period last year. For Q2 2021, revenue rose by 33.3% to RM105.6 million whilst profit from operations increased by 433.1% to RM8.1 million against the same quarter last year. According to the Group, its operations in Singapore also reported higher off-trade and eCommerce sales, offsetting higher operating expenses to drive growth. 

At the same time, the Group's associated company, Lion Brewery, in Sri Lanka posted a higher share of profit of RM2.7 million in Q2 2021 compared to RM0.5 million in the previous year’s corresponding quarter when it business decelerated after COVID-19 curbs were re-imposed in May. 

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