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AnalysisMalaysia

7 things I learned from the 2023 Carlsberg Malaysia AGM

Incorporated in 1969 and listed in 1971, Carlsberg Brewery Malaysia Berhad has operations in Malaysia and Singapore as well as an investment in Sri Lanka. Its beer portfolio includes brands like Carlsberg, Asahi, and 1664; craft beer brands; and alcohol-free brews.

Here are seven things I learned from the 2023 Carlsberg Malaysia AGM.

1. Revenue and net profit excluding extraordinary items increased 36.1% and 59.5% year-on-year to RM2.4 billion and RM314.2 million respectively in 2022. The better results were due to recovery from the COVID-19 lockdown, price adjustments, better sales mix, and improved operational efficiency. The price adjustments were to absorb the impact of surging commodity costs caused by the Russia-Ukraine conflict, supply chain disruptions, and pent-up demand that outstripped supply post-pandemic. Dividend per share improved from 56 sen in 2021 to 88 sen in 2022 but is still marginally below the 2019 figure of 100 sen.

2. Sales from e-commerce shrank 9% year-on-year in 2022 as consumers returned to brick-and-mortar stores. Sales from on-trade channels (pubs, clubs, coffee shops, and food courts) are recovering and expected to return to pre-pandemic levels this year. Sales from off-trade channels (supermarkets, convenience stores, and sundry stores) continue to grow, although growth rates have slowed down compared to the pandemic. Sales from on-trade channels used to contribute to about 70% of the company’s sales, while the remaining came from off-trade channels and e-commerce sales.

3. The company maintained its leadership position in the cider and wheat beer categories with its Somersby and 1664 brands respectively. These premium brands have grown faster compared to other beer categories. The company’s craft beer brands and alcohol-free beer segments remain small although the latter registered 177% year-on-year sales growth in 2022 from a low base in the previous year.

4. Some shareholders were worried about the current political and economic turmoil in Sri Lanka. Even with the prevailing uncertainty, Carlsberg Malaysia’s profit share from its Sri Lankan operations surged by 41.8% to RM21.5 million in 2022, notwithstanding a one-off retrospective surcharge tax amounting to RM3.7 million in the same year.

5. Some shareholders were concerned about the impact of potential changes on the political front in Malaysia on the local business environment. Managing director Stefano Clini stressed that the company remains apolitical. There are no restrictions on selling alcoholic drinks in all states in the country except for some Muslim-majority municipalities.

6. A shareholder highlighted that the company’s debt almost quadrupled from RM38.8 million in 2021 to RM121.0 million in 2022. Independent non-executive director Chew Hoy Ping explained that the debt level remains at a manageable level. A portion of the debt was used to partly fund a new RM108 million glass bottling line in 2022. The debt was also used to shore up inventory for 2023 Chinese New Year festive sales.

7. A shareholder asked if the company was losing market share to Heineken Malaysia. Clini said that the company doesn’t disclose its market share and there is no official data across all trade channels. However, based on internal reviews, he revealed that Carlsberg Malaysia is gaining beer market share in Malaysia. Investment banks including Affin Hwang Capital estimate that Heineken Malaysia owned about 60% of the pre-pandemic beer market share in Malaysia, with the remaining by Carlsberg Malaysia.

The fifth perspective

Carlberg’s revenue is expected to moderate in 2023 as the pent-up demand for beer eases. Further, consumer purchasing power is affected by rising interest rates and costs amid an inflationary environment. Carlsberg is also affected by inflation, but it can pass on the increased costs to customers, as long as price hikes are not too sudden or significant. At the same time, cost increases can also be mitigated by improving cost efficiency and selling more premium beers with higher profit margins. Carlsberg Malaysia is still a solid dividend stock post-pandemic.

Liked our analysis of this AGM? Click here to view a complete list of AGMs we’ve attended »

Shak Chee Hoi

Chee Hoi is an investor and research analyst at The Fifth Person. He was previously involved in wildlife conservation work with a non-governmental organisation as well as sustainability consultancy work. He personally believes in impacting society and the environment for the greater good.

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