The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Commonwealth Brewery is predicting that global supply chain disruption will increase its costs by 10 percent over the remainder of 2021 as it sustains its return to profitability.

The BISX-listed Kalik manufacturer, unveiling its results for the 2021 third quarter and first nine months, said it will seek to maintain its profit margin despite the cost base pressures after it produced a positive $2.7m bottom line swing for the three months to end-September.

Aided by the economy’s continued re-opening and relaxation of COVID-19 restrictions, the vertically-integrated brewer, wholesaler and retailer turned the $766,965 comprehensive loss sustained in 2020’s third quarter into a $1.976m profit this time around.

Up against relatively weak year-over-year comparisons, given that the 2020 third quarter was hit by multiple lockdowns and other COVID-related restrictions, Commonwealth Brewery’s third quarter sales rose by close to $7m or just over 29 percent, hitting $29.13m as opposed to $22.533m in 2020.

Hit hard last year by the tourism industry’s shutdown, rising unemployment and reduced incomes, and restrictions on bars, restaurants and nightclubs, as well as alcohol sales generally, Commonwealth Brewery said that it “continued to experience strong growth in net revenue” compared to the same period last year.

“The company’s expectation is that growth will continue for the remainder of the year as COVID-19 related restrictions are more relaxed and the economy recovers, led by rebound of the tourism sector,” Commonwealth Brewery said in a statement to shareholders.

“The retail and off-premises channels have demonstrated rapid improvement driven by consumer spending preferences for home and small gathering consumption, rather than at events attended in large numbers.

“Going into the fourth quarter of the year, the company anticipates that with the approach of the festive season and further easing of curfews and other restrictions, there will be further improved growth in revenue as the hotel and on-premises channels continue to experience boost to their performance.”

Noting, though, that supply chain and other headwinds remain, Commonwealth Brewery added: “Operating expenses have increased to $23m for the period (13 percent), which is in line with the increase in production to mirror the increase in consumer purchases.

“The current disruption of the global supply chain has resulted in increases to the cost of goods and production materials. The company anticipates that this disruption will result in approximately a 10 percent increase in cost over the remainder of the year. Commonwealth Brewery will continue to implement cost mitigation and other measures to maintain the profit margin.

“In the third quarter, Commonwealth Brewery continues to show profitability with net profit of $1.9m in comparison to the net loss of $0.8m for the comparative period 2020. Overall, Commonwealth Brewery realised comprehensive income of $6.121m for the first nine months of 2021. Management will continue to adjust its business strategies as we restore operating results to pre-COVID 19 levels.”

For the nine months to end-September 2021, Commonwealth Brewery’s bottom line has undergone a positive $10m swing back into profitability, generating net income of $6.12m for the period as opposed to a $3.923m loss last year.

Revenues for the period rose by close to $14m or 20 percent, hitting $83.339m as opposed to $69.42m in the nine months to end-September 2020. As for operating expenses year-to-date, they were up 4.2 percent at $68.544m.

The BISX-listed brewer, which is 75 percent majority owned by Heineken, unveiled its 2021 third quarter results just after its managing director warned shareholders not to expect the group’s revenues to fully recover from COVID-19 “before 2023” following a $38.2m drop-off in 2020.

Jurgen Mulder had reminded investors of the pandemic’s impact in the 2020 annual report, with the global health crisis having derailed what he described as a strong start to the year despite Hurricane Dorian’s impact on Grand Bahama and Abaco.

Branding January and February 2020 as “financially very strong”, the Kalik manufacturer ultimately endured “a dramatic year” in 2020 where its revenues fell by 29 percent or $38.2m year-over-year due to the combined impact of COVID-19 lockdowns, prohibitions on alcohol sales and other health-related measures.

“Only a relentless focus on cost allowed us to reduce our expenses by $27.8m (24 percent), minimising the overall loss to $0.6m for the full year. Our focus on cash led to a reduction of $4.8m (17 percent) in inventories and a reduction of $3.8m (56 percent) in our receivables. Our loans and borrowing increased by $1.2m,” Mr Mulder told shareholders.

Turning to the future, he indicated that Commonwealth Brewery’s top-line will not return to pre-pandemic levels this year or in 2022. “We are carefully optimistic for 2021, but don’t expect a full recovery of revenues before 2023,” Mr Mulder said. “In the meantime, we will be focused on revenue recovery and managing our cost base carefully, while building a bright future.”