CARLSBERG BREWERY MALAYSIA BERHAD(Company No. 9210-K)
(Incorporated in Malaysia)
FREQUENTLY ASKED QUESTIONS
B. MARKET INFORMATION
5. What was the size of the Malaysian malt liquor market in 2007? 6. How many breweries are operating in Malaysia?
C. DIVIDENDS AND RETURN ON INVESTMENT
D. INVESTMENTS
12. Carlsberg Malaysia has a healthy surplus funds position. Where are these funds invested? 13. What are the details of Carlsberg Malaysia's overseas investment?
E. DUTY COMPOSITION
14. What is the duty composition in Malaysia? 15. What was the past trend of duty increases for beer and stout and when was the last duty increase? 16. What is the import duty on beer?
F. OTHER COMPANY INFORMATION
A.
SHAREHOLDERS INFORMATION
1. Who is the Company's largest shareholder?
As at 31 March 2008, Carlsberg Breweries A/S (CBAS) holds a 51.00% equity interest in Carlsberg Malaysia. CBAS, a company incorporated in Denmark.
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2. What is the Company’s shareholding structure?
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3. What is the status of the Carlsberg Malaysia Share Buy-Back Programme?
In August and September 1999, the Company had purchased 2,330,000 ordinary shares (adjusted for share split) of RM0.50 each through the (then) Kuala Lumpur Stock Exchange for an aggregate consideration of RM12,042,622.40 financed by internally generated funds. The average price was RM5.17 per share (adjusted for share split) whilst the lowest and highest prices paid for each share were RM4.88 and RM5.30 respectively.The shares bought back are being retained as treasury shares in accordance with Section 67A of the Malaysian Companies Act 1965. None of the shares bought back have been cancelled, reissued or distributed as share dividends.
At the previous AGM on 17 April 2007, the shareholders of Carlsberg Malaysia had given a mandate to purchase further shares, which together with the 2,330,000 shares already bought back, cannot exceed 10% of the issued and paid-up share capital of the Company.
As the authority for the said purchase of further shares will expire at the forthcoming AGM schedule to be held on 22 April 2008, the Company is seeking a new mandate from its shareholders, which will be effective up till the subsequent AGM in 2009.
As at 28 February 2008, no further shares have been repurchased since September 1999.
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4. What are the developments relating to the Employees Share Option Scheme?
The 1998 Employees Share Option Scheme (ESOS) for eligible employees of the Group had expired.Since the last (and only) allotment of share options in October 1998 comprising 2,530,000 ordinary shares of RM0.50 each at an exercise price of RM4.05, there had been no further allotments.
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B. MARKET INFORMATION
5. What was the size of the Malaysian malt liquor market in 2007?
The Malaysian malt liquor market comprises the "beer" segment and the "stout" segment.The duty paid beer market volume for 2007 of 1.04 million hectolitres (1HL is equivalent to 100 litres) reflects an increase of 6.9% from 2006. The duty paid stout market for 2007 was 0.21 million hectolitres which represents an increase of 4.6% from the previous year.
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6. How many breweries are operating in Malaysia?
There are presently 2 breweries approved by the Ministry of International Trade and Industry and licensed in accordance with the Industrial Co-ordination Act 1975 (ICA) operating in the Malaysian local malt liquor market - Carlsberg Malaysia and Guinness Anchor Berhad. In 2007, a new brewery, Napex Corporation which was licensed by the Customs commercial operations to manufacture and distribute a local beer brand
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C. DIVIDENDS AND RETURN ON INVESTMENT
7. What is Carlsberg Malaysia’s dividend payment history?
# For comparison purpose, figure prior to 2006 are restated based on RM0.50 per share.
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8. What is Carlsberg Malaysia's 5-year dividend payout as a percentage of profit after tax? 
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9. What is the return on investment for a Carlsberg Malaysia shareholder?
Assuming that a shareholder had acquired 1,000 shares at par at the inception of the Company in 1971 and subscribed for the rights issue and received all bonus issues, his/her returns and market value of such investment as at 31 December 2007 would be :-
# Assumption of issue of exact lots for illustrative purposes only
A RM1,000 investment made in 1971, and a further RM500 investment in 1973, would have generated a total capital value of RM140,100 and a total gross dividend of RM179,569 as at 31 December 2007. Had the investor placed the equivalent investment of RM1,000 and RM500 in 1971 and 1973 respectively in a fixed deposit at an annual interest rate of 5%, compounded annually, the amount in the bank would be RM8,839 as at end of 2007.
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10. What is the historical trend of Carlsberg Malaysia's share prices against the Company’s net dividend yields ?
Note: The KLCI and share prices are based on data as at 31 December.
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11. What is the historical trend of Carlsberg Malaysia's net price-earnings multiple?
Note: The net earnings per share is based on the profit after taxation for the financial year ended 31 December and the share prices are as at 31 December .
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D. INVESTMENTS
12. Carlsberg Malaysia has a healthy surplus funds position. Where are these funds invested?
Carlsberg Malaysia’s surplus funds are placed in the money market with local and foreign financial institutions approved by the Board of Directors. Some of the funds have also been approved by the Board for placement in approved monetary instruments for higher yields.
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13. What are the details on Carlsberg Malaysia's overseas investment? On 30 October 2006, the Group entered into a Shareholders’ Agreement with Wiseline Limited to acquire 50% equity interest in Carlsberg Distributors Taiwan Limited (CDTL), a company incorporated in Taiwan, for a total cash consideration of RM0.7 million. As part of the acquisition, the Group also subscribed for 50 per cent of the right issue of CDTL at an investment of RM2.2 million. The Group’s total investment in 50 per cent equity of CDTL or 5.0 million shares of NT10 each amounted to RM2.9 million.
CDTL is primarily engaged in the packaging, marketing and distribution of Carlsberg’s brands in Taiwan market. Carlsberg Malaysia’s share of losses in the year ended 31 December 2007 was RM2.3 million (2006 : RM0.9 million), which has been consolidated proportionately into the Group’s financial statement.
Carlsberg Malaysia also has a 24.6% investment in Lion Brewery ( Ceylon) PLC (“LBCPLC”), a company incorporated in Sri Lanka. LBCPLC is principally engaged in the manufacture, marketing and distribution of beer, stout, shandy and non-alcoholic beverages. The Group, by virtue of its 24.6% investment in LBCPLC has a 5.5% indirect interest in a new brewery project in the state of Rajasthan, India which is a joint venture project led by Carlsberg Breweries A/S, Denmark.
The cost of the investment in LBCPLC is RM10.9 million and the market value of the investment was RM17.2 million as at 31 December 2007 based on the share price on the Colombo Stock Exchange and the prevailing exchange rate.
Carlsberg Malaysia’s share of LBCPLC’s loss for the year ended 31 December 2007 was RM17,000 compared to a profit of RM0.7 million in 2006.
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E. DUTY COMPOSITION
14. What is the duty composition in Malaysia?
Beer and stout manufactured in Malaysia are subject to Malaysian excise duty and sales tax.Excise duty payment is at RM7.40 per litre. There is also an “Ad Valorem” duty payment of 15% on the ex-brewery price for the beer products.
Sales tax is also levied at 5.0% of principally the ex-factory invoice price on all products sold.
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15. What was the past trend of duty increases for beer and stout and when was the last duty increase?
Excise duty was increased in September 2005 by 23.3% and an “Ad Valorem” duty of 15% ex-brewery price was introduced whilst sales tax was reduced to 5.0% of ex-brewery price of the products. The net increase in September 2005 was around 8.0%. There was no duty increase for the year 2006 and 2007.
Excise Duty since 1991 :
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16. What is the import duty on beer?
The import duty for beer is RM5.00 per liter.
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F. OTHER COMPANY INFORMATION
17. What are the major components of the Group's costs, etc. as a percentage of revenue?
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18. How are the Carlsberg beer products segmented in 2007?
Typically, both bottles and draught are included under on-premise consumption whereas cans are generally in the take-home market. Bottle beer is usually consumed in coffee shops and restaurants whereas draught beer is normally sold in pubs and hotel outlets.
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19. What is the staff strength of the Group? The total number of staff as at 31 December 2007 was 585 compared with 588 as at 31 December 2006.
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20. What is the Group's outlook for 2008? In the middle of 2007 the new management team revised the Group’s strategic plan in order to achieve the long term ambition of regaining market leadership – profitably. Under the concept of “Must Win Battles” a number of projects were identified to be implemented during 2008 and 2009. The Group’s selected five Must Win Battles are:
1. Rebuild Winning Culture
Drive unified company values and identity. Build a performance-based culture with improved cross functional cooperation and increased focus on Consumer and Customer needs;
2. Win the Carlsberg GL Challenge
Maintain our market leadership in the mainstream beer segment and revitalize the Carlsberg Green Label brand image via best-in-class Communication, Innovation and on-ground Activation;
3. Develop Strong Portfolio of brands
Optimize role and strategy of existing portfolio brands. Launch new brands to target different Consumer needs and different Consumption occasions, with particular focus on the Premium segment;
4. Drive Sales Execution Excellence
Ensure recruitment, retention and development of best sales People. Optimize Structure of sales force and Distributors. Strengthen commercial Mindset of sales staff. Develop effective Processes and IT tools;
5. Establish a Strong Platform for Growth
Drive efficient use of resources and improve productivity in Administration and Supply Chain; establish effective and transparent Business Processes; build robust data and Management Information Systems.
The implementation of the projects under the Must Win Battles is also the Group’s journey to make Carlsberg “Probably the best beer company in Malaysia”. We acknowledge that the competition had benefited in terms of market share gains during our business restructuring. We however believe that with our continued focus to implement the strategic agenda, we shall be in a stronger position to grow profitable brand share and maximize medium and long term value for our shareholders.
Escalating material costs have been a major concern for the Group but we will continue to drive the initiatives under the “Excellence Projects” to reduce the impact on profit margin. As announced earlier, the Group’s major contract manufacturing customer, Carlsberg Singapore Pte Ltd had re-located its sourcing of its supplies to a neighbouring country due to competitive reasons, including the imposition of security ink markings on such exports, which have resulted in additional costs to the Company as well as lower duties between Singapore and the neighbouring country. This will have an impact on the Group’s export sales and earnings in 2008 and future years.
It is the hope of the Group and the industry that the Government, being aware that the excise duties in Malaysia are the 2nd highest in the world after Norway, will not introduce further duty increases for a few years until such time the excise duties of neighbouring countries catches up with Malaysia. The presently high excise duties encourage smuggling. Whilst enforcement against smuggled beer products have improved over the period, the Group is hopeful for continued effective enforcement to further curb smuggled imported beer products in the country.
The Group will continue to invest in training to develop the skill base of the employees. Continued training of employees is essential to equip them with the skills and knowledge to enhance their performances in the dynamic and challenging competitive environment. Competition in Malaysia is expected to remain intense especially with the entrance of a 3rd brewery in the country in 2007. The Group will nevertheless continue to make its business more cost effective and to maintain and expand its Carlsberg brand leadership for the beer segment as well as to increase share in the stout segment.
In the light of the foregoing, the Group expects 2008 to be a very challenging year.
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