Business

Fitch confirms ‘AAA(lka)’ rating of Sri Lanka’s Lion Brewery amid new competition

Saturday November 30, 2024 2:54 pm

ECONOMYNEXT – Fitch Ratings said it was confirming an ‘AAA (lka)’ rating of Sri Lanka’s Lion Brewery, with a stable outlook, despite possible competition from a competitor.

“We expect Lion to maintain its solid market position in the local beer industry over the medium term,” Fitch said.

“Our view is underpinned by Lion’s range of product offerings across price points, which makes cash flow defensive through cycles. It also benefits from prominent shelf space across its sales channels.

“However, we expect competition will increase over the medium-term from the recent new beer product launch, owned by a leading local spirits manufacturer.

“The competition will benefit from an established retail-channel and distribution network, although Fitch believes the impact on Lion’s revenue will be gradual given production capacity will only ramp-up gradually over the medium-term.”

The full statement is reproduced below:

Fitch Affirms Lion Brewery at ‘AAA(lka)’; Outlook Stable’

Fitch Ratings – Singapore – 27 Nov 2024: Fitch Ratings has affirmed Sri Lanka-based Lion Brewery (Ceylon) PLC’s National Long-Term Rating at ‘AAA(lka)’. The Outlook is Stable.

The affirmation and Stable Outlook reflect our view that Lion’s credit metrics will remain commensurate with its rating over the medium-term, as Sri Lanka’s economic environment continues to stabilise. We believe Lion’s strong financial profile will buffer against any weakening in consumer demand.

Lion’s rating reflects its marketing leadership in the domestic beer industry, which is protected by high entry barriers stemming from licensing requirements and a ban on media advertising, strong brand presence and an extensive retail and distribution network.

KEY RATING DRIVERS

Strong Market Position: We expect Lion to maintain its solid market position in the local beer industry over the medium term. Our view is underpinned by Lion’s range of product offerings across price points, which makes cash flow defensive through cycles. It also benefits from prominent shelf space across its sales channels.

However, we expect competition will increase over the medium-term from the recent new beer product launch, owned by a leading local spirits manufacturer. The competition will benefit from an established retail-channel and distribution network, although Fitch believes the impact on Lion’s revenue will be gradual given production capacity will only ramp-up gradually over the medium-term.

Net Cash Position: We expect Lion to maintain a net cash position over the financial years ending March 2025 (FY25) to FY28, supported by steady operating cash flow and minimal expansionary capex plans, as Lion’s capacity is sufficient for medium-term growth. We expect annual capex of around LKR5.0 billion-5.5 billion, mainly for maintenance and minor capacity expansionary plans, as seen in its recent set up of a minibrewery for product research and development and the expansion of warehouse space.

Solid Interest Coverage: We forecast interest cover to remain solid for Lion’s rating (FY24: 6.6x), supported by lower market interest rates than during Sri Lanka’s economic crisis. The country’s average weighted prime lending interest rate declined to around 9.0% as of October 2024. Although we expect interest rates to marginally increase over the next few years, Lion’s reduced borrowings, helped by stable operating cash flow over the past year, allows it to maintain a strong interest coverage ratio.

Weaker Margin: We forecast Lion’s EBITDA margin to decline to 14.5% in FY25 (FY24: 15.9%), driven by challenges in passing on increased costs to end-consumers. We believe the company is likely to partially absorb cost increases, including excise duty hikes, to maintain sales volume, due to weaker consumer purchasing power. We forecast Lion’s EBITDA margin to decline further to around 12%-13% from FY26, on the background of increased competition in the medium-term.

Excise Duty Risk: We expect slower excise duty increases, after a cumulative hike of around 64% over a 12-month period through January 2024. The Sri Lankan government is required to review excise duties, including those on alcohol products, on a yearly basis as part of the International Monetary Fund’s (IMF) extended fund facility programme. Fitch expects further excise duty increases to be in line with Sri Lanka’s inflation rate, but risks to sales volume from higher-than-expected excise duty hikes, as seen in January 2024, remain.

Increasing Overseas Presence: Lion’s incorporation of its Singapore subsidiary, Lion Beer Pte Ltd, extends its overseas activities, on which the company has already spent around LKR100 million in initial funding. Lion expects to continue funding the investment in the medium term, which should facilitate its export operation in south-east Asia. However, we expect revenue from exports to remain around 3%-4% in the medium term.

Weak Links with Parent: We notch Lion above the consolidated profile of its parent, Carson Cumberbatch PLC, subject to Lion’s Standalone Credit Profile. Our rating approach is supported by an assessment of ‘Insulated’ access and control and ‘Open’ legal ringfencing under our Parent and Subsidiary Linkage Rating Criteria. Lion has a stronger credit profile than Carson, supported by more defensive cash flows and a net cash position.

‘Insulated’ access and control is reflected in Lion’s financial independence and the presence of a large minority shareholder – Carlsberg Brewery Malaysia Berhad – which owns 25%, despite Carson’s controlling stake. Our assessment of ‘Open’ legal ringfencing is based on the lack of regulatory or self-imposed ringfencing of Lion’s cash flow, as there are no formal restrictions in place. Cash outflow from Lion to Carsons has been limited to dividends historically.

DERIVATION SUMMARY

Lion is rated at the same level as Sri Lanka-based conglomerate, Melstacorp PLC (AAA(lka)/Stable), whose rating reflects its dominant market position in spirits, through its subsidiary Distilleries Corporation. Melstacorp’s larger scale and stronger margin is counterbalanced by its more aggressive expansion and investment strategy.

Lion is rated at the same level as Hemas Holdings PLC (AAA(lka)/Stable). Hemas has high exposure to the defensive healthcare and consumer sectors, catering to diversified end-markets. Meanwhile, Lion’s rating reflects its dominant position in the local beer industry. We expect both companies to maintain similar financial risk profiles, characterised by low leverage, in the medium term.

Sunshine Holdings PLC (AA+(lka)/Stable) has leading positions in defensive sectors, but a small scale. Both companies face some regulatory risk; Lion faces risks from excise duties and indirect tax hikes on the sales of beer, while Sunshine faces price ceilings on some pharmaceutical products.

Lion, given its credit strength, is rated higher than a number of large Sri Lankan banks, non-bank financial institutions and insurance companies, which are more exposed to sovereign stress than Lion, despite their individual credit strengths. This is due to the substantial sovereign-issued securities held for regulatory reasons as well as their broader exposure to numerous sectors in the local economy.

KEY ASSUMPTIONS

Fitch’s Key Assumptions Within Our Rating Case for the Issuer:

– Revenue to increase by 14% in FY25 and around 8% from FY26 onwards

– EBITDA margin to contract to around 14.5% in FY25 (FY24: 15.9%)

– Annual working capital investments of around LKR1 billion-2 billion to support revenue growth

– Annual capex of around LKR5 billion-6 billion

– Dividend payout ratio of 40%

RATING SENSITIVITIES

Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade:

-An increase in leverage, measured as EBITDA net leverage, to over 5.0x for a sustained period

-A decrease in EBITDA interest coverage to less than 2.0x for a sustained period

-Stronger links with parent, Carson Cumberbatch, under Fitch’s Parent and Subsidiary Linkage
Rating Criteria or weakening of the parent’s consolidated credit profile.

Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade:

-There is no scope for an upgrade, as Lion is already at the highest rating on our Sri Lankan National Rating scale.

LIQUIDITY AND DEBT STRUCTURE

Strong Liquidity Position: Lion had about LKR15.2 billion in cash and cash equivalents as at end-September 2024 exceeds its short-term debt maturities of around LKR4 billion, as well as its overall debt of LKR4.6 billion.

The majority of Lion’s debt is working capital related and can be rolled over by banks given its strong cash flow generation and steady working capital cycle. Lion also has about LKR15 billion of uncommitted undrawn credit lines that can be used for debt repayment as of end-June 2024. Despite being uncommitted, we expect banks to honour these facilities, due to Lion’s solid credit profile in a local context.

ISSUER PROFILE

Lion is Sri Lanka’s largest brewery, with a strong distribution network of close to 3,000 outlets across the island. In addition to its own brands, Lion brews and markets Carlsberg branded beer.

Markets

Sri Lanka stocks close down 0.60-pct, dragged by HNB and LOLC

Friday November 13, 2026 3:28 pm

ECONOMYNEXT – Sri Lanka’s Colombo Stock Exchange closed down on Friday, CSE data showed, with the benchmark All Share Price Index moving down 0.60 percent.

The ASPI was down 133.22 points at 22,024.18, while the more liquid S&P SL20 was down 1.06 percent, or 67.55 points, at 6,298.02.

The ASPI ended the week up 784.53 points from last Friday.

Positive contributors to the ASPI were Dialog Axiata (up 0.40 percent at 50.20 rupees), Distilleries Company of Sri Lanka (up 0.52 percent at 58.30 rupees), Aitken Spence (up 3.60 percent at 151.00 rupees), Ceylon Tobacco Company (up 1.05 percent at 1,828.50 rupees), and LOLC Finance (up 1.96 percent at 5.20 rupees).

Hatton National Bank (down 1.88 percent at 403.75 rupees), Richard Pieris and Company (down 6.21 percent at 27.20 rupees), LOLC Holdings (down 2.17 percent at 405.00 rupees), Sampath Bank (down 1.91 percent at 154.00 rupees), and Singer (Sri Lanka) (down 2.40 percent at 77.30 rupees) were top negative contributors.

Market turnover was 3.23 billion rupees. Capital goods led turnover with 869.21 million rupees. (Colombo/Nov13/2026)

Economy

Sri Lanka MP slams budget speech for omitting Tamil national question

Friday November 13, 2026 2:56 pm

ECONOMYNEXT – A Sri Lanka legislator has voiced strong disappointment that the President’s budget speech failed to make a single mention of the Tamil national question.

“It is very unfortunate that in His Excellency the President’s speech, there has not been a single word mentioned about the Tamil national question. Not a single word,” Shanakiyan Rasamanickam said.

“A budget speech generally, is a policy direction of the government for the next year. The budget speech is not only a statement of the country’s fiscal position or the economy’s position. It is the country’s, the government’s, plan, or what the government plans to do the following year. That’s a policy statement.”

Former presidents would at least mention the Tamil question even if it was not resolved, he said.

Former President Ranil Wickremesinghe in his speech, in his policy statement, he would mention: “The Tamil national question must be resolved,” Rasamanickam said.

Former Presidents Maithripala Sirisena and Gotabaya Rajapaksa also mentioned that the national ethnic question must be resolved, he added.

“Every President, every country’s Head of State, in their policy statements, have acknowledged the fact that there is an unresolved national issue, the Tamil national question, that it needs to be resolved. Various governments have proposed various mechanisms; none of them have succeeded, but at least it was mentioned.”

This year’s budget made allocations for the Office of Missing Persons, and the Office of Reparations.

“But the domestic mechanism is a mechanism that the victim community has rejected. So you all are allocating money to a mechanism where the victim community is not going to be part of.”

Last year’s budget 1 billion was allocated to be spent on the Trincomalee and Jaffna airports.

“Where was that 1 billion for the Trincomalee and Jaffna airports spent last year?”

“The trajectory of this government, Honourable Deputy Speaker, is worrying to me. It’s really worrying to me. Because if the objective is to say that there is no Tamil national question, if the objective is to say that you all have resolved any ethnic issue that this country faced, then Honourable Deputy Speaker, then I think the Tamil people will teach this government a very, very, very harsh lesson in the future.” (Colombo/Nov13/2026)

Bonds & Forex

Sri Lanka sells extra Rs6.5bn Treasury bills after auction

Friday November 13, 2026 12:32 pm

ECONOMYNEXT – Sri Lanka has sold 6,500 million rupees of treasury bills offered on tap at an average rate of 9.95 percent, the public debt management office said, bringing the total of bills sold in the week to 85.562 billion rupees.

The issue offered 90 billion.

Total market subscription was 6.5 billion rupees.

The debt office sold a 12-month bill at 9.95 percent.

On Wednesday (11) the debt office raised 79 billion rupees of 3, 6 and 12 month bills after offering 90 billion.

The settlement date is November 13. (Colombo/Nov13/2026)

Construction and Real Estate

Access Engineering Sept quarter group net profit surges 200-pct to Rs4.75bn

Friday November 13, 2026 12:15 pm

ECONOMYNEXT — Sri Lanka’s Access Engineering PLC recorded a group net profit attributable to equity holders of Rs. 4.75 billion for the quarter ended September 30, surging 200 percent from Rs. 1.58 billion a year earlier, interim accounts showed.

Basic earnings per share rose to Rs. 4.08 for the September quarter, up from Rs. 1.58 previously.

Quarterly group revenue expanded 36 percent to Rs. 20.39 billion from Rs. 14.94 billion, underpinned by condominium property handovers — reflected in inventories dropping Rs. 7.69 billion since March to Rs. 35.71 billion — alongside strong automobile sales and steady civil engineering execution.

Cost of sales rose at a slower 27 percent to Rs. 14.34 billion, lifting gross profit by 64 percent to Rs. 6.05 billion and expanding gross margins to 29.7 percent from 24.7 percent.

Other income jumped 144 percent to Rs. 259.9 million, while administrative expenses rose 75 percent to Rs. 1.14 billion, leaving operating profit up 64 percent at Rs. 5.16 billion.

However, finance costs more than doubled, rising 107 percent to Rs. 1.18 billion on elevated group borrowings of Rs. 43.74 billion, partly offset by finance income climbing 302 percent to Rs. 42.2 million.

Share of results from equity-accounted investees rose 122 percent to Rs. 26.7 million, pushing pre-tax profit up 56 percent to Rs. 4.05 billion.

Income tax swung to a net reversal of Rs. 186.6 million from an expense of Rs. 804.1 million, boosted by deferred tax assets on unrelieved losses from a 100 percent enhanced capital allowance claimed by 60 percent-owned radiopharmaceutical subsidiary Access Medical Tracers (Private) Limited.

Total period profit rose 136 percent to Rs. 4.24 billion, with non-controlling interest declining 24 percent to Rs. 164.9 million following last year’s buyout of minority shareholders in Harbour Village (Private) Limited.

No separate exchange gain or loss was itemized in quarterly earnings, though foreign currency translation via associates recorded a Rs. 17.4 million loss in other comprehensive income, alongside USD 16.6 million in corporate guarantees.

Notes also flagged an expected Rs. 1.45 billion recovery from the terminated South Asia Commercial and Logistics Hub project, a Rs. 225 million post-quarter legal settlement already provided for, and a Supreme Court appeal over a 2011/12 PAYE tax ruling.

Group assets stood at Rs. 132.4 billion as of September 30, with net asset value per share at Rs. 46.70, as the Employees’ Provident Fund raised its stake to 5.69 percent.

Access Engineering shares closed at 80.00 rupees at the end of September and are currently trading around 85.80 rupees. (Colombo/Nov13/2026)

Economy

Sri Lanka private sector says timely implementation of Budget 2027 key

Friday November 13, 2026 11:43 am

ECONOMYNEXT – Private sector body, The Ceylon Chamber of Commerce, said it was encouraged by the broad direction of Budget 2027, noting that it reinforces Sri Lanka’s commitment to economic transformation while maintaining policy continuity, macroeconomic stability, and fiscal discipline.

“This continuity is particularly important as the country seeks to transition from economic stabilisation to a more durable, investment-led growth trajectory.”

The chamber also noted several areas where the Budget could have placed greater emphasis to strengthen the country’s growth prospects.

“In particular, there is a need for a stronger focus on attracting Foreign Direct Investment (FDI), accelerating factor market reforms, particularly in land and labour, and fast-tracking public procurement reforms to improve the efficiency and speed of project implementation.

“More targeted and actionable proposals could have been introduced to unlock the potential of sectors with significant growth opportunities, including tourism, agriculture, IT/BPO and logistics.”

The chamber said the budget contains positive measures aimed at enhancing competitiveness, and external sector resilience, while presenting opportunities for focus on sectors that can accelerate growth.

“A number of the key structural reforms identified in last year’s Budget have been carried forward and strengthened, providing greater certainty and predictability to businesses and investors.

“These include the continued implementation of the Trade National Single Window (TNSW), the phased removal of para-tariffs, the rollout of the Digital ID framework, efforts to expand market access through new Free Trade Agreements (FTAs), the strengthening of one-stop-shop investment facilitation mechanisms, progress on Customs reforms, the expansion of Bandaranaike International Airport (BIA), enhanced financing support for SMEs, and reforms relating to the management of State-Owned Enterprises.”

The CCC said that more than 20 proposals submitted by it have been reflected in Budget 2027.

These include measures to strengthen investor facilitation through the establishment of a professionally managed investment promotion agency; continued efforts to improve trade facilitation and export competitiveness; the Government’s consideration of a successor programme with the International Monetary Fund (IMF); accelerated progress on key legislative reforms; the expansion of digital government services; and the promotion of cashless payments and broader digital adoption. The Budget has also captured several priorities relating to energy security, including the accelerated deployment of Battery Energy Storage Systems (BESS) and investments in fuel storage infrastructure, initiatives to optimize underutilized agricultural land, measures to support the expansion of the digital economy and the IT/BPO sector, and tax reforms to support exporters, including the acceptance of newly VAT-registered exporters as eligible exporters.

“The inclusion of these priorities reflects the value of sustained public-private dialogue and demonstrates increasing alignment between national policy objectives and the needs of a competitive, export-oriented economy.

“The priority now must be effective and timely implementation to translate policy commitments into investment, competitiveness, exports and sustainable growth.” (Colombo/Nov13/2026)