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Guinness Anchor set for a solid year

June 7, 2012

PETALING JAYA: Guinness Anchor Bhd (GAB) expects a solid performance for the financial year ending June 30, 2012, based on strong results in the first nine months.

“We have not seen any fundamental changes in our business in the last quarter,” managing director Charles Ireland said at a briefing to provide a business update to the media here today.

The consumption of alcoholic beverages is expected to increase in June as many bars will be showing live matches of the Euro 2012 and there are reports of heavy bookings among the football fans.

For the first nine months ended March 31, 2012, GAB recorded a 13% increase in profit after tax to RM172.6 million with revenue up 12% to RM1.3 billion.

Ireland said the revenue growth could have exceeded 20% had it not been for GAB’s decision to reduce the duty-free beers that it sold.

The decision to reduce the duty-free volume was because of the low margin, and some products have been coming back into the Malaysian market competing with the duty-paid volume, he explained.

He said amid the ongoing eurozone crisis, GAB plans to be a bit more conservative in the coming year compared to the past couple of years when the economic environment was more conducive.

He said GAB will be more careful about its investment and conservative in its budgeting to continue to deliver the sort of growth that the shareholders expect and insulate itself from the risks arising from the eurozone crisis.

He said GAB is spending more than RM75 million for capex in the current financial year but in the next financial year this will be reduced by about 30%.

If Greece makes an exit from the eurozone and Spain goes down, there will be contamination across the global economic landscape, he said.

GAB has been active on innovation and introduction of new brands or new packaging into the market but has chosen a more conservative approach than its competitors, having learned from its experiences, he said.

The reason for the conservative approach is that GAB sees innovation as tremendously expensive with a high failure rate, he said.

“New innovations [in the alcoholic beverages segment] in Malaysia are far likely to fail than they are to succeed,” he said.

Cultural reasons

A few years ago, he said, GAB brought in Malta Quench, which was successful in many markets but not in the local market and eventually had to be withdrawn.

However, he said, innovation in the market is important to keep the news flowing and to stimulate consumers.

Innovation gets people to re-evaluate all the brands in the market, he said, adding that innovations introduced are more likely to fail than succeed due to cultural reasons.

He said innovation is really hard and expensive, not just in Malaysia, but also all over the world.

On expanding the market overseas, he said the likelihood is low as GAPL Pte Ltd, the majority shareholder of GAB, is keen on its focusing on the domestic market.

At the moment, only two percent of its volume is exported overseas.

On illicit trade, he said it is still a major problem with illicit beers in Sarawak sold for as low as RM10 for three cans.

On taxation, he said the tax hike for alcohol beverages is still a possibility but urged the government, instead of increasing the tax, to modernise the present tax structure with its 26 tax rates on alcohol, to improve revenue.

He noted that the tax in Malaysia is already the second highest in the world after Norway.



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