CARLSBERG BREWERY BHD (CAB) 1.

INTRODUCTION

Incorporated in December 1969, Carlsberg Brewery Malaysia Berhad (Carlsberg Malaysia) began brewing Carlsberg Green Label beer locally in 1972. Since then, the brand has become part of everydays life and is the No. 1 beer brand with more than a 50% share of the Malaysian Beer Market. Carlsberg Malaysia is listed on the Main Board of Bursa Malaysia Securities Berhad (Malaysia Stock Exchange) under the consumer products sector. It is an established brewery that manufactures and distribute beers, stout and other beverages mainly in the domestic Malaysian market and also has investments in Sri Lanka, Taiwan, Singapore and in a Malaysian alcoholic beverage company. 1.1. Products

Carlsberg Malaysia has a beer for every drinker with different palates and lifestyles for every occasion. Its expanded brand portfolio includes Carlsberg Green Label, Carlsberg Gold, Carlsberg Special Brew, Tuborg beer, SKOL beer, SKOL Super beer, Danish Royal Stout, Corona Extra, Tetleys, Jolly Shandy Lemon and Peach as well as non-alcoholic Nutrimalt drink. In addition, Carlsberg Malaysia through its subsidiaries, has also a wide range of imported international beer brands such as Hoegaarden, Stella Artois, Budweiser, Fosters and Becks. The Company now has 7 of 9 worlds top international beer brands

1.2. Key Dates 1903 First Carlsberg beer imported into Malaysia 1969 Incorporation of Carlsberg Brewery Malaysia Berhad

1971 Construction of brewery in Shah Alam, Selangor completed 1972 First locally brewed Carlsberg Green Label sold in Malaysia 2000 Hap Seng Consolidated Berhad (HSCB) sells its CBMB shares Carlsberg increases its shareholding to 49.66%

2005

Carlsberg increases its shareholding to 51%

2008 Carlsberg Distributors Taiwan Ltd (CDT), a 50% joint venture company between Carlsberg Malaysia and Lei Shing Hong (LSH)acquired 75% equity in Cottingham Co Ltd, Taiwan (Cottingham)

2009 Carlsberg Malaysia acquired Carlsberg Singapore.

2. DECISION MADE BY

3. ISSUES/PROBLEM Issues Profit after tax changed from RM 138 million in 1999 to RM 76 million in 2008 Dividends from RM 109 million in 1999 to RM 79 million in 2008 Retained earnings decrease from RM29 million to negative 3 million in 10 years (since 2002). This means dividend payment had exceeded its net profit

GABs 4th quarter net profit increase 41% ( RM 27.39 million) while CARSLBERG in 2nd quarter profit fell 21.7% (RM 12.88 million)

Exercise duty year 1991 2.75% 19921997 3-6% 19982002 4.32% 2003 4.75% 2004 6% 20052008 7.4%

Problems Due to the heavy increases in excise duties Carlsberg losing share to their competitor GAB because they have no choice to increase price. Since Carlsbergs customers are price sensitive, in near future they will switch to other cheap new local brands, which have more price flexibility due to subsidy given by government. In other scene, consumers now experience low price difference between two brands, so they tend to move more high-end beers such as Heineken (GAB), or switching to other alcohol drinks such as wine. So now most challenge Carlsberg is facing is whether concentrate on newly introduced high-end offerings such as Tuborg, Skol Super, and Carlsberg Gold and compete directly with GABs high-end beer market, or pursue the cost-

innovation and maintain the position to defend market share from new local producers. Latter choice is extremely difficult, because the only ingredient that made up more than 85% of beer is water, and price of other raw materials are increasing. 4. SOLUTION 4.1. Financial solution a) Increase price Carlsberg need to make an effort to steal share from GAB in the highend premium beer brand market, because after some time passed from tax increase customers will tend to adapt new prices by time. b) Increase volume of sale Increase production if Carlsberg did not prefer to increase price. c) Expand business by investing to other countries Expanding internationally always give businesses a wider customer base. In this case Carlsberg have expanded other countries to benefit from the huge customer base therefore increase production level, lead to benefit from economic of scale, therefore creates less cost lead to more profit. And wider customer base may also give Carlsberg a better chance of increase in sales. 4.2. a) Promoting Carlsberg need to promote their new brands in consumers mind using premiums and other kinds of promotions such as sweepstakes and contests b) Improving Operational Efficiency a Key Agenda Focus on operational excellence throughout our supply chain and improving the quality of our products in the most efficient manner 5. RECOMMENDATION i. Expand business by investing to other countries Expanding internationally always give businesses a wider customer base. In this case Carlsberg have expanded other countries to benefit from the huge customer base therefore increase production level, lead to benefit from Non-Financial solution

economic of scale, therefore creates less cost lead to more profit. And wider customer base may also give Carlsberg a better chance of increase in sales. ii. Promoting Carlsberg need to promote their new brands in consumers mind using premiums and other kinds of promotions such as sweepstakes and contests iii. Increase volume of sale Increase production if Carlsberg did not prefer to increase price.

6. TOOLS SWOT Analysis Strengths Investing in advertisement (Information & communication on technology) to raise productivity & efficiency to cope with demand for its products. More intense current brand positioning compared to other beer Current market shares in the Malaysian beer industry the brands. highest (52%). Weaknesses Guinness Stout is slowly but steadily catching up with Carlsberg in terms of campaigns and brand image. Opportunities Malt prices and other material costs for beer are cheaper due to the strengthening currency of the Malaysian Ringgit (RM). Increasing trend of entertainment lifestyle in Malaysia, especially alcohol that induce alcohol consumption. Threats Rise in alcohol and tobacco tax in Malaysia. The increase in price would lead to decrease in sales volume, especially concerning the loss legitimate sales in favour of smuggled beer. The majority of the shares of Carlsberg Malaysia are Dutch owned, and the political situation in Denmark is currently stressed. This might affect Carlsberg Malaysia to some extent.

The Malaysian government ban on advertising in media, including the internet, will affect Carlsberg.

Financial Information 2010 Profitability Ratio Return on Equity Return on Total Assets Return on Revenue Investment Ratio P/E Ratio Dividen Yield Dividen Payout Liquidity Ratio Current Ratio Quick Ratio 22.995 14.311 9.739 14.502 9.177 1.331 2009 14.791 8.056 7.283 18.233 3.965 0.723 2008 16.266 12.14 7.93 14.458 3.611 0.522 2007 16.658 13.235 8.745 16.498 8.255 1.362

1.311 1.134

1.121 0.956

3.248 2.777

4.12 3.713

Financial Leverage Ratio Interest Coverage Ratio (times) Total Debt Equity Ratio Leverage Ratio Performance Ratio Gross EPS (Sen) Dividend (Sen) -38.003 0.091 0.602 111.113 0.017 0.832 0.0 0.252 0.337 0.0 0.205 0.259

43.58 58.00

24.90 18.00

24.90 13.00

25.70 35.00

Income Statement (MYR '000) Turnover Operating Profit Profit/loss Before Tax Taxation Profit After Tax Extraordinary Items Minority Interest Net Profit/loss To Shareholders Gross EPS (Sen) Dividend (Sen)

2010 1368158.0 174586.0 176536.0 -42413.0 134123.0 0.0 -881.0 133242.0 43.58 58.00

2009 1045483.0 97224.0 102560.0 -25835.0 76725.0 0.0 -583.0 76142.0 24.90 18.00

2008 960207.0 93726.0 101291.0 -25172.0 76119.0 0.0 30.0 76149.0 24.90 13.00

2007 897530.0 91201.0 97705.0 -19212.0 78493.0 0.0 0.0 78493.0 25.70 35.00

Balance Sheet (MYR '000) CURRENT ASSETS Cash And Bank Balances

2010

2009

2008

2007

101,370.00

118,585.00

227,017.00

216,774.00

Short Term Investment Stocks Debtors / Receivables Other Current Assets TOTAL CURRENT ASSETS CURRENT LIABILITIES Short-term Loans Creditors / Payables Taxation Dividends Other Current Liabilities TOTAL CURRENT LIABILITIES NET CURRENT ASSETS

48,834.00 207,223.00 4,566.00 361,993.00

58,590.00 217,591.00 4,462.00 399,228.00

66,297.00 163,527.00 456,841.00

41,551.00 160,110.00 2,724.00 421,159.00

52,951.00 212,908.00 10,212.00 276,071.00 85,922.00 361,993.0 0

8,586.00 340,367.00 7,220.00 356,173.00 43,055.00 43,055.00

6,324.00 131,256.00 3,058.00 140,638.00 316,203.00 316,203.0 0

1,310.00 99,990.00 925.00 102,225.00 318,934.00 318,934.0 0

Cashflow Statement (MYR '000) Cash Flows From Operating Activities Cash Flows From Investing Activities Cash Flows From Financing Activities Net Changes In Cash And Cash Equivalents

2010 222,527. 00 (218,929. 00) (19,178. 00) (15,580.00 )

2009 107,949. 00 (188,357. 00) (27,744. 00) (108,152.00 )

2008 105,460. 00 (18,542. 00) (76,675. 00) 10,243.0 0

2007 76,634. 00 19,411. 00 (80,497. 00) 15,548.0 0

Cash And Cash Equivalents Brought Forward

116,950. 00

226,737. 00

216,774. 00

201,226. 00

Cash And Cash Equivalents Carried Forward

101,370.00

118,585.00

227,017.00

216,774.00