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Sri Lanka distilleries net down amid tax hikes, consumer crunch

ECONOMYNEXT – Distilleries Corporation of Sri Lanka, the country’s largest hard alcohol marker, saw profits plunge 63.9 percent to 579 million rupees in the June quarter as revenues stayed flat amid weak demand.

The firm reported earnings of 1.93 rupees per share for the quarter. Distilleries is part of Melstacorp, and is no longer traded following a share swap.

In the June quarter, gross revenues rose 0.2 percent to 21.34 billion rupees, and net revenues after sales taxes rose 8.4 percent to 6.69 billion rupees, but costs surged 8.4 percent to 5.2 billion rupees, shrinking gross profits 50 percent to 1.42 billion rupees.

Total revenues are down from the 22.6 billion rupees reported in the March quarter.

Industry analysts say the Distilleries was hit by higher import taxes on ethanol imposed after the last budget, while value-added taxes re-imposed in full also added to the total price.

Some competitors are, however, selling below the market leader’s price, raising questions over excise tax administration, they say.

The high price of legal arrack as well as strong beer has raised questions whether moonshine is taking legal market share.

Beer sales are sharply down at the expense of hard liqour after the new administration raised beer taxes faster. In the past, taxes on beer were below the actual alcohol content, according to promoters of higher beer taxes.

Meanwhile, several publicly traded consumer firms have reported weaker sales, pointing to larger weakness in demand.

In 2015, Sri Lanka’s Central Bank printed tens of billions of rupees to help finance an expanded budget deficit, and driving credit to unsustainable levels, in a so-called ‘Keynesian stimulus’ generating a balance of payments crisis and capital flight.





It is usual for demand to come down during the Keynesian hangover phase, analysts say, especially when the centarl bank collect forex reserves, amid slowing credit. (Colombo/Aug14/2017)

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