This article first appeared in The Edge Financial Daily on February 15, 2019

KUALA LUMPUR: Carlsberg Brewery Malaysia Bhd’s (Carlsberg Malaysia) fourth-quarter (4Q) net profit rose 34.9% to RM67.45 million or 22.06 sen per share, from RM50 million or 16.36 sen per share a year ago.

Revenue for the quarter ended Dec 31, 2018 rose 25.6% to RM525.65 million from RM418.45 million previously.

Speaking at its media and analyst briefing yesterday, Carlsberg Malaysia managing director Lars Lehmann (pic) said the group’s organic revenue growth stood at 23% excluding the impact of the reimplemented sales and service tax (SST).

He said that while SST has contributed to revenue, it is also considered a cost as the group has to pay the tax back to the government.

Meanwhile, the group declared an interim dividend of 16.6 sen per share, a final dividend of 22.4 sen per share and a special dividend of 9.3 sen per share, for a total payout of 48.3 sen. The group will pay out a record high dividend of 100 sen per share for the financial year ended Dec 31, 2018 (FY18).

Lehmann said this 100 sen dividend “won’t necessarily go on forever” and that the group has to evaluate its financial performances as well as capital expenditure needs.

Carlsberg Malaysia’s dividend policy is to pay out at least 75% of net quarterly profit, he said, adding that the group may consider a special dividend if it has surplus cash after taking into account future cash requirements.

Lehmann attributed the improved 4Q profitability to a stronger performance by its Malaysian and Singaporean operations, as well as a higher share of profit from its associate company, Lion Brewery (Ceylon) PLC.

“Our consistent focus on executing well on our SAIL’22 strategy is paying off in both Malaysia and Singapore,” he said.

Meanwhile, the group’s net profit for FY18 as a whole rose 25.3% to RM277.15 million, from RM221.17 in FY17. Full-year revenue increased 14.6% to RM1.98 billion, from RM1.77 billion posted for FY17.

Its Malaysian operations posted a revenue increase of 21.9% to RM1.4 billion, with net profit rising 17.4% to RM254 million. Its earnings in Singapore rose slightly due to a one-off negative trade offer adjustment of RM17.2 million in FY17.

The group posted a RM21 million share of the profits from Lion Brewery (Ceylon), compared to a RM200,000 share of loss posted for the previous year.

As part of the group’s outlook for 2019, Lehmann said the rising prices of raw materials such as barley are industry-wide issues that the group has to mitigate, with chief financial offical Lim Chee Keat adding this will increase prices by an average range of approximately 5%-10%.

“We are putting in initiatives to mitigate that [rising material costs],” said Lehmann.

He added the group plans to mitigate these costs by increasing the level of efficiency in its supply chain, as well as the potential price increases of its products.

In terms of areas of growth, Lehmann said the group will maintain its current strategy, adding that its Brooklyn Brewery Beer saw a sales increase of 178% in FY18.

He said that while Malaysia is behind other markets in terms of take-up, he expects the craft beer trend to grow in Malaysia.

Of the four premium brands, the group offers only its Asahi Super Dry beer, which posted an 8% growth, when compared to its other brands such as Connor’s Stout Beer, which saw a 42% growth, Somersby Cider, which expanded 24%, and 1164 Blanc Beer, which rose 40%.

Lehmann said Asahi is already a sizeable brand, and that “it is more difficult to move the needle up in percentage terms”.

“There is not a lot of new distribution opportunities, so it is just pure demand,” he said, adding the beverage has double-digit growth in Singapore, and that its sales in Malaysia have been slow in comparison.