Malaysia: Early Chinese New Year helps Guinness Anchor Berhad interim results improve marginally

Guinness Anchor Berhad (GAB) posted on February 21 a marginal 2.7 % increase in group revenue to RM559.495 million for the half year ended 31 December 2005 from RM544.783 million in the preceding corresponding period.

Group pre-tax profit for the half year increased by 14.6 percent to RM91.978 million from RM80.288 million for the half year ended 31 December 2004 while net profit improved by 14.3 percent to RM66.247 million from RM57.945 million previously.

For the quarter ended 31 December 2005, group revenue was down 2.9 percent to RM254.863 million over the preceding corresponding quarter while pre-tax profit showed a slight improvement of 4.6 percent to RM41.464 million.

GAB Managing Director Theo de Rond said, although pre-tax and net profit for the half year were higher, this was largely due to stocking up by the market in preparation for the early Chinese New Year. He, however, noted that revenue for the last three months of 2005 was much lower and this was a clear reflection of the impact of consecutive duty hikes imposed by the Government on the industry.

“From Budget 2004 to Budget 2006, we have had three consecutive years of duty increases resulting in substantially higher beer and stout prices and lower consumption. Subsequently, overall demand has fallen and the malt liquor market (MLM) volume contracted by about 10 percent in 2005 and is expected to contract at the same rate in 2006. Hence, we foresee post-Chinese New Year sales to slow down and this would impact total sales for the year when compared with that of the preceding year.

“Smuggled beer has also become an increasing problem as smuggling activities have become more lucrative with the resultant higher beer and stout prices following the duty hikes. To curb smuggling, the Government introduced tax stamps on imported beer cans and bottles to show that duty has been paid.

“However, stricter enforcement is required as consumers can still buy imported beer, which is easily available at supermarkets, without the tax stamps. If left unchecked, imported beer without the tax stamps and smuggling activities will have a substantial negative impact on the Government’s revenue.

“Meanwhile, GAB is also conducting a trial run of printing security ink on its products, in compliance with a directive from the Ministry of Finance. The security ink will further raise the cost of production and eventually affect consumers and dampen the industry unless anti-smuggling efforts are intensified.

“Furthermore, there was almost no increase in duty for hard liquor whereas duty on wines increased by only half of what was imposed on malt liquor products. All these factors have clearly taken a toll on GAB and the industry as can be seen by the market contraction and reduced sales volume.

“The full impact of price increases of malt liquor products and lower demand, following the most recent duty increase announced in Budget 2006, has yet to be felt by the industry and will only become apparent during mid-2006,” de Rond said.

Despite the challenging market conditions, GAB has continued to outperform the industry and record higher revenues and profits in the past few years. Its successful strategy has to do with its diverse portfolio of brands as well as greater organisational effectiveness and operational efficiency.

“This strategy will remain the driving force for GAB in the current year as well as coming years and we are confident that it will see us through the challenges that lie ahead. We will continue to invest in innovations and continue to re-invent and update our brands so that they remain relevant to our consumers as well as to the highly competitive environment in which we operate. We recently launched a host of campaigns to breathe new life into our main brands and we have are planning for even more excitement this year,” de Rond added.

GAB is proposing to declare an interim dividend of 13 sen gross per 50 sen stock unit less Malaysian income tax at 28 percent which, if approved, will be payable on 18 May 2006 to stockholders registered at the close of business on 5 May 2006. In 2004, GAB declared an interim dividend of 12 sen gross per 50 sen stock unit.

About Guinness Anchor Berhad (GAB)

GAB evolved from the merger between two brewing giants, Guinness Malaysia Bhd, and Malayan Breweries (Malaya) Sdn Bhd. The company’s principal shareholder is GAPL Pte Ltd based in Singapore. GAPL Pte Ltd is a joint venture between Diageo PLC and Asia Pacific Breweries Ltd. Listed on the Main Board of Bursa Malaysia, GAB produces, markets and distributes Guinness, Tiger Beer, Heineken, Anchor Smooth Beer, Baron’s Strong Brew, Kilkenny, Lion Stout, Anglia Shandy and Malta.

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