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Brewery Chief: Pre-Covid Revenues Not Back Till 2023

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Commonwealth Brewery’s managing director has warned shareholders not to expect the group’s revenues to fully recover from COVID-19 “before 2023” following a $38.2m drop-off last year.

Jurgen Mulder reminded investors of the pandemic’s impact in the BISX-listed brewer’s annual report, with the global health crisis having derailed what he described as a strong start to 2020 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” 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 ahead of the upcoming annual general meeting (AGM).

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.”

Julian Francis, Commonwealth Brewery’s chairman and ex-Central Bank of The Bahamas governor, added that 2020 had “measured up to our worst fears” from an economic perspective. “Perhaps the clearest reflection of the impact of COVID-19 on the Bahamian economy is a comparison of tourist arrivals in 2020 versus 2019,” he added.

“The record number of 7.2m visitors achieved in 2019 dwindled to just 1.7m by December 2020, and most of these visits occurred during the first quarter of the year. In effect, the Bahamas tourism industry was virtually at a standstill for the last nine months of the year......

“Faced with a 28 percent decline in its business for 2020, Commonwealth Brewery has nevertheless been able to contain the net loss on operations to $1.3m - close to break even - through judicious operational and cost controls.” Mr Francis was referring to the $1.3m net loss, while Mr Mulder’s $0.6m figure denoted the operating loss.

Commonwealth Brewery’s financial statements show it is due to repay a $5m loan taken out in May 2020 by November 14, 2021. And it has just over $2m left to repay on a separate $8.175m loan, having paid down a further $1.908m on the then-outstanding $4.027m since year-end 2020.

The 2020 annual report was released after Commonwealth Brewery produced a more-than $7.32m bottom line reversal to return to profitability in the 2021 second quarter, with its revival aided by relaxed COVID restrictions and a more open economy.

The BISX-listed brewer was also up against weak comparatives as the year-before period featured the harshest pandemic lockdown measures, enabling it to enjoy a 63.7 percent or near $11m year-over-year increase in top-line revenue. And it received a further boost from a $1.2m revaluation gain on the worth of one of its Grand Bahama properties, which went straight to boost the bottom line.

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, the vertically-integrated brewer, distributor and retailer, said: “Commonwealth Brewery (CBL) experienced a dramatic increase in net revenue during the second quarter – up 63.7 percent when compared to the second quarter of 2020.”

Commonwealth Brewery’s top-line revenue for the three months to end-June 2021 was up year-over-year by 64.5 percent, climbing to $29.965m compared to just $18.217m the prior year. Net revenues rose from $16.527m in the 2020 second quarter to just over $27m.

As a result, Commonwealth Brewery generated $4.448m in total comprehensive income for the 2021 second quarter compared to a $3.005m loss the year before. That was sufficient to wipe out its minor first quarter loss and produce a total comprehensive profit of $4.164m for the first half or six months to end-June.

“Consequently, in the second quarter, Commonwealth Brewery experienced a net profit of $3.248m which is in stark comparison to the net loss of $3.005m suffered during the same period last year,” the BISX-listed company said.

“Overall, Commonwealth Brewery realised comprehensive income of $4.164m for the first six months in 2021. This was inclusive of a revaluation gain of $1.2m on one of our main properties in Grand Bahama. Management will continue to adjust its business strategies as we continue to restore operating results to pre-COVID 19 levels.”

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