Carlsberg M’sia expects S’pore ops to contribute 30% to net profit in 2010

Carlsberg M’sia expects S’pore ops to contribute 30% to net profit in 2010

Tags: Carlsberg Malaysia | Carlsberg Singapore | CBMB

Written by Surin Murugiah
Thursday, 30 July 2009 11:16

SHAH ALAM: CARLSBERG BREWERY MALAYSIA BHD [ CARLSBG 4.410 -0.050 (-1.121%) ] (CBMB) expects Carlsberg Singapore Pte Ltd (CSPL) to contribute about 30% to its net profit in the financial year ending Dec 31, 2010 pursuant to its proposal to acquire the latter.

CBMB also expects to resume its dividend payout at previous levels after surprising the market with a lower dividend early this year.

It paid out a total of 12.5 sen in dividends last year, against 35 sen in each of its previous three financial years.

CBMB managing director Soren Holm Jensen said CSPL was already a successful and profitable entity, having posted a revenue of S$78 million and a net profit of S$10 million in 2008.

“A key binding factor is the significant sourcing and operational synergy that would create RM22 million cost savings. The total incremental net profit from the acquisition, excluding funding cost, is RM46 million,” he said.

“The main synergies are that it would shift sourcing back to Carlsberg Malaysia; advertising and promotions would enjoy double tax deduction, as well as the operational synergies,” he said at media briefing on its proposed acquisition of CSPL.

CBMB announced on Tuesday it had entered into a memorandum of understanding (MoU) with its Denmark-based parent company Carlsberg Breweries AS (Carlsberg) to acquire the latter’s Singapore operations held by CSPL for RM370 million cash.

Among the salient features of the MoU to be included in the sales and purchase agreement are 20 years of territorial rights; sourcing rights with significant synergies; profit guarantee for CSPL for the financial years 2009 and 2010; and Carlsberg to support any board proposal to declare a dividend of between 50% and 70% of CBMB’s distributable profit for a duration of five years.

Jensen said preliminary estimates showed CBMB’s net profit for 2010 to increase to RM113 million from RM76 million in 2008, on the assumption that the proposal to acquire CSPL was approved by minority shareholders.

“The estimates need further verification and is subject to a full due diligence and final evaluation by an independent adviser,” he said.

Jensen said CBMB would likely complete the acquisition without borrowing as it had RM260 million cash and would be able to accumulate sufficient cash by year-end.

“But we might require short-term borrowings for working capital. In any event, we will return to a net cash level in a short period,” he said,

On CSPL, Jensen said it held a 21% market share in Singapore and that the Carlsberg brand ranked second in the republic after the locally brewed Tiger beer.

“The brand is positioned in the upper mainstream segment and has been steadily gaining share in the segment since the 1990s. It also has a stronghold in coffee shops and hawker centres, supported by strong branding in both on- and off-trade,” he said.

He said Singapore was an attractive beer market, with a compound annual growth rate of 4% from 2000 to 2008, from 642,000 hectolitres (HL) to 858,000HL.

Jensen said CBMB also viewed its proposed acquisition of CSPL as an added advantage as it would give the brewer a better understanding of new Tiger beer products, which are generally launched in Singapore first before Malaysia.

For the three months ended March 31, CBMB posted a 19% year-on-year lower net profit of RM21.4 million on the back of a marginally higher revenue of RM289.8 million.

As at end-March, CBMB had cash and cash equivalents of RM231.7 million while its trade receivables stood at RM140.5 million. Total liabilities were RM123.6 million.

CBMB’s brands include Tuborg, SKOL Beer, Danish Royal Stout, Tetley’s English Ale, Jolly Shandy and Nutrimalt.


This article appeared in The Edge Financial Daily, July 30, 2009.