Lion Brewery (Ceylon) PLC Annual Report 2011 - Carson and ...

Chairman’s Statement
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Lion Brewery (Ceylon) PLC
Annual Report 2011
It gives me great pleasure to welcome shareholders to the Company’s 15th Annual General Meeting
& to present to you the audited financial statements of the Company along with the Report of the
Directors & the Chief Executive’s Review.
The year in review is most notable for the progress made in the Country’s economy. With armed
conflict at an end & business & consumer confidence at a high, Sri Lanka’s GDP grew by an impressive
8%. Your Company’s performance reflected the growth in the economy & returned strong results during
the year under review. The Chief Executive’s Review deals extensively with the performance of Your
Company but suffice to say that the multiple strengths of brand portfolio, world class distribution, state
of the art manufacturing & supply chain systems & a management full of aggression & intent combined
well to take full advantage of a market on the upturn.
Based on the results achieved during the year, I am pleased to inform shareholders that an interim
dividend of Rs 4/- per share was declared on 09th May 2011. Since this amounts to 32% of the
Company’s post tax profits, Your Board does not recommend a further dividend for the year. Under
normal circumstances, the interim distribution would have been replaced by a first & final dividend.
However, since dividends after 31st May 2011 would no longer be free of tax - a result of the BOI tax
holiday period coming to an end - Your Board thought it appropriate to make the annual distribution to
shareholders as an interim payment.
Whilst the year proved to be a satisfying one, the amendment to the rate of Corporate Tax applicable
to the industry causes concern. At a time when the standard rate of Corporate Tax was reduced by
20%, that applicable to the alcobev industry was increased by approx. 15%. Thus at present, a gap
of approx. 45% exists between the standard rate of Corporate Tax and that applicable to the alcobev
industry. For an industry already burdened with high taxes – in the form of Excise Duty – and stringent
regulations, the inequitable rate of Corporate Tax came as an unpleasant surprise.
I am confident that the Sri Lankan economy will progress well in the coming year. Your Company is well
poised to take advantage of the opportunities that are likely to emerge. Increasing capacity is a priority
and management is currently working on a 3 year expansion program. Other structural changes are
also taking place within the Company, the details of which are spelt out in detail in the Chief Executive’s
Review. All things considered, I believe that the year ahead will prove to be a successful one for the
Company.
In order to retain its dominant position in the market & build upon the fine results of the year, it is
critical that the Company expands its brewing & packaging capacity in Sri Lanka ahead of demand.
Initial estimates envisage that the Sri Lankan business will require substantial investments. In the
meanwhile, recent projection in India also foretell of a need for substantial investments in that country.
Since Your Board considers Sri Lanka its priority and since it does not consider it judicious to stretch