(From left) Carlsberg Brewery Malaysia Bhd corporate communications director Pearl Lai, managing director Stefano Clini and chief financial officer Vivian Gun at its AGM for FY2022 on April 19. (Photo by Patrick Goh/The Edge)

KUALA LUMPUR (April 19): Carlsberg Brewery Malaysia Bhd (Carlsberg Malaysia) is likely to see weaker earnings growth this year, as the low base effect dissipates.

The group is also concerned about consumer sentiment, which is being weighed down by worries over tightening disposal income and uncertainties about the future, which could impact demand for the group’s products, according to managing director Stefano Clini.

“The only thing that worries me the most is the consumers’ sentiment, which is partially driven by tightening on disposable income, which is real, and [the consumers’ sentiment is also] partially driven by psychology [factors, such as] worries about the future uncertainties around us, [for example] recessions...and all these things.

“This is the one factor that worries me the most in the short term, and this will impact consumption of our beers across all categories,” he told a press conference after the group’s annual general meeting on Wednesday.

Clini did not rule out the possibility of beer consumption normalising after the Covid-19 reopening last year, although it is too early to tell at this stage. “We have data for two to three months this year, so it is a bit premature for us to draw conclusions. But, that could happen as consumption goes down a little bit as a whole,” he explained.

Clini said 2023 will remain another challenging year due to the risk of a global recession, escalating commodity prices, and rising local and global inflationary pressure.

The brewer’s annual net profit surged 57.7% to RM317.05 million in FY2022 from RM200.99 million in the previous year, driven by top-line growth and higher profits in both its Malaysia and Singapore operations, combined with a higher share of profit from Lion Brewery (Ceylon) plc (LBCP) in Sri Lanka. Annual revenue grew 36.1% year-on-year to RM2.41 billion from RM1.77 billion, owing to a lower base due to various lockdown restrictions previously, including the suspension of brewery operations from June 2 to Aug 15, 2021.

Clini does not expect the group to repeat its stellar FY2022 performance this year. “Growing profit [last year] is a result of a lower base as we went through Covid-19. Frankly, it is not in the cards,” Clini told a press conference on Wednesday (April 19).

Nonetheless, Clini said the group will continue to pursue market share, maintain its profit margin, and to make progress in pursuing its commitment towards environmental, social and governance (ESG) agenda.

‘Small’ increase in overall costs after electricity surcharge hike

Following the increase in electricity tariff that took effect at the start of this year — surcharge for all medium and high voltage users have been raised from 3.7 sen per kilowatt hour (kWh) to 20 per kWH — there has been a small increase in the group’s overall costs, according to chief financial officer Vivian Gun Ling Ling.

“We definitely see an increase in utilities costs since the government increased the [electricity] tariffs. But the increase in costs is pretty manageable and is not totally out of whack. In the overall scheme of costs, it is a small, single digit increase,” Gun said.

This is thanks to the group’s initiative to automate and transform its brewing process, which has helped to increase efficiency and reduce utility consumption, as well as to offset the higher electricity costs. It should be noted that Carlsberg Malaysia completed the upgrade of its brewery facilities for innovation and sustainability after spending RM108 million last year.

Meanwhile, the surge in raw material costs is taking a breather, Gun noted, as commodity prices have trended down after peaking last year.

“I think we saw the spike in commodity prices, maybe around April last year, whereby aluminium was at record high. Since July [last year], it has come down slightly, but it has not come down to the pre-pandemic level, so it still remains high, but it is not as high as it was before.

“Hopefully that will give us some stabilisation. I am hoping it will gradually come down and maybe go back to the pre-pandemic level. But given the global situation [such as] tension between Ukraine and Russia, there is still a bit of uncertainty.”

Nevertheless, she is hopeful the post-Covid led surge in demand would stabilise, which would stabilise the overall supply and demand for commodities and result in the easing of prices. “So things are not as bad as they were during the peak [of commodity prices] in 2022, so hopefully [we will get] a little breather,” she added.

Shares in Carlsberg closed six sen or 0.27% lower at RM21.90, bringing the group a market capitalisation of RM6.7 billion.