The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Commonwealth Brewery yesterday blamed a 15 percent year-over-year revenue decline for its 2021 first quarter loss more than doubling in comparison to 2020 figures.

The BISX-listed Kalik brewer, unveiling its financial performance for the three months to end-March, said it was up against tough pre-COVID comparisons from the prior year as the global pandemic and associated health restrictions only impacted the final two weeks of the 2020 first quarter.

“Commonwealth Brewery’s (CBL’s) revenue decreased by 15 percent during the first quarter of the year compared to the same period last year,” the vertically-integrated brewer, wholesaler and liquor retailer said in a statement.

“This decrease was expected as it was a direct result of the COVID 19 pandemic that began to have a negative impact on our business during the end of the first quarter in 2020. Although, there was an overall decrease in revenue during the quarter compared to the same period last year, there has been a steady rise in revenue during the quarter with a 37 percent increase between January and the end of March.”

Commonwealth Brewery did not quantify what it meant by the “37 percent increase”, and total revenues for the 2021 first quarter fell by almost $4.4m - dropping from $28.61m in the 2020 period to $24.244m - due to a combination of reduced consumer demand and spending, together with ongoing restrictions on openings and hours for bars, nightclubs and hospitality businesses.

To mitigate the top-line impact, Commonwealth Brewery managed to slash total operating expenses by close to $4m year-over-year, slashing them by 15.5 percent from $25.466m the year before to $21.521 in the 2021 first quarter. This reduction was aided by the company’s recent workforce downsizing.

“Operating expenses decreased by nearly $4m or 15 percent in 2021 over the same period in 2020,” the company added. “This was mainly due to a decrease in personnel expenses and raw materials, consumables and services.

“The decrease in personnel expenses were a result of downsizing of staff in the company that began during the end of the 2020 fourth quarter. On the other hand, various factors contributed to the decline in raw materials, consumables and services related principally to the fall in business activity.”

Personnel costs dropped by more than $1m year-over-year, reducing from $5.264m in the 2020 first quarter to $4.112m, representing a decline of almost 22 percent. The brewer added: “Subsequently, Commonwealth Brewery experienced a net loss for the period of $284,200 - a similar result as the 2020 first quarter.

“Management is confident that measures implemented - and being implemented - to mitigate the negative impact to operations of the current economic slowdown are being successful.” The net loss more than doubled from $138,425 in the 2020 first quarter to $284,158.

This followed a $5.72m loss for the 2020 full-year, of which some $4.389m was incurred on the revaluation of Commonwealth Brewery’s real estate assets. The Kalik and Heineken manufacturer, which also owns the 700 Island Wines and Spirits retail chain, also disclosed a $1.331m net loss from operations for the 12 months to end-December as opposed to a $10.356m profit for 2019.

Top-line revenues fell by more than $38m or over one-quarter, dropping to $96m from $134.141m in 2019, due to a combination of depressed local and tourism demand plus reduced selling ability amid multiple COVID-19 related lockdowns and other restrictions.

The vertically-integrated BISX-listed brewer’s full-year results, which give an insight into how hard consumer products have been hit by the pandemic, also disclosed that it suffered an operating loss of $644,583 compared to a $11.092m operating profit for the 12 months to end-2019.

The plunge in financial performance came as Commonwealth Brewery permanently laid-off less than 30 persons in January, taking current staffing levels to 334. The year-over-year revenue decline reduced slightly in the 2020 fourth quarter as cost containment measures took effect, helping to boost operating income.

“Commonwealth Brewery experienced a decline in net revenue during the fourth quarter, down 25 percent compared to the fourth quarter 2019. The cost mitigating programme drove down operating expenses by 28 percent. The result from operating activities was $2.8m for the quarter,” the BISX-listed brewer said.

“Net revenue for the year as a whole was down by $34m or 28 percent compared to 2019, reflecting the devastating impact of COVID-19 on our economy. Relentless focus on cost has limited the loss on operating activities to only $0.6m. Our efforts in reducing working capital and limiting capital expenditure enabled us to pay back over 80 percent of the $8m COVID-19 [loan] facility while securing liquidity.”