Malaysia: Brewers anticipating solid earnings driven by the FIFA World Cup tournament
Local breweries are anticipating recording solid earnings in the final quarter of this year, driven by the FIFA World Cup tournament next month and the earlier timing of Chinese New Year (CNY) in 2023, The Star reported on October 11.
An analyst from a local bank-backed brokerage said major sporting events like the football World Cup will spur growth in on-trade channels.
“Pubs and even restaurants that sell alcoholic beverages tend to become busy, especially during the World Cup, as people like to watch matches there while drinking and socialising with their friends.”
The FIFA World Cup will be held in Qatar from Nov 20 to Dec 18.
Meanwhile, Hong Leong Investment Bank (HLIB) Research in a recent report said beer sales, especially in the second half of 2022, are expected to be buoyed by pent-up demand for out-of-home drinking, the return of foreign tourists and the 2022 FIFA World Cup.
“The depreciating ringgit will also bode well for local tourism, which should lead to stronger foreign tourist arrivals in the second half of 2022 and boost on-trade sales.”
Additionally, HLIB said it is unconcerned about lingering concerns about demand slowing down, following Heineken Malaysia Bhd’s decision to raise beer prices by 6% to 8% (both off-trade and on-trade) from Aug 1.
“We are not overly concerned as beer remains the cheapest alcoholic drink in the market and thus has relatively inelastic demand.
“We opine that the price hike, together with better operating leverage (due to the absence of forced brewery closures) and a “premiumisation push”, should help to cushion any margin erosion arising from cost inflation.”
Heineken raised prices in response to rising input costs.
Separately, an analyst pointed out that the earlier timing of CNY in January (as opposed to February) 2023 meant that the bulk of sales for breweries would take place earlier.
“Because of the earlier timing of CNY, the bulk of the sales will take place in the final quarter of this year rather than the first quarter of 2023.”
Carlsberg Brewery Malaysia Bhd’s net profit for its second quarter ended June 30, 2022 rose to RM88.95mil from RM37.14mil in the previous corresponding period, while revenue grew to RM574.23mil from RM349.21mil.
In a filing with the local bourse on its latest financial performance, Carlsberg Malaysia said it will continue to stay vigilant to intensify its cost control management whilst continuing to reinvest in its brands to fuel growth amidst the uncertainty in the economy.
“Whilst the group sees an overall positive outcome as both Malaysia and Singapore have transitioned into the endemic phase of Covid-19, the group is mindful of uncertainties in the macroeconomic environment that will drive up inflationary pressures and have a negative impact on consumer sentiment and spending on beer.
“The disruption to global supply chains and the escalating commodity prices will add further cost pressures and uncertainties to the landscape.”
Meanwhile, Heineken Malaysia saw its net profit for the second quarter ended June 30, 2022 improve to RM86.07mil from RM25.27mil in the corresponding period, while revenue grew to RM644.58mil from RM349.42mil a year earlier.
Heineken Malaysia said it expects continued pressure from global supply chain disruptions, rising input costs, weakening ringgit and rising inflation to impact consumer purchasing power.
“The group will remain agile in responding to the volatile business environment and the new market reality with a focus on delivering our “EverGreen” strategy to future-proof the business and deliver sustainable growth.”
11 October, 2022
