The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Commonwealth Brewery has revealed it successfully challenged a $1.156m tax demand by the Government and is now awaiting its response to the arbitration ruling.

The Kalik maker, in its just-released 2021 annual report, disclosed that the Department of Inland Revenue had sought to claim that taxes were owing on what it described as “stock transfers” between entities in the Commonwealth Brewery group that took place in 2016 and 2017.

“As of December 31, 2020, Commonwealth Brewery and its group of companies were contingently liable to the Department of Inland Revenue upon assessment of intra-company stock transfers between its subsidiaries for Business Licence purposes,” the annual report said.

“The group was assessed $596,003 in 2016 and $560,403 in 2017, which required the issuance of a bank guarantee. The company successfully challenged the matter in arbitration and is currently awaiting further response by the Government of The Bahamas.” No indication was given of when this would be forthcoming.

Meanwhile, Jurgen Mulder, the vertically integrated brewer, wholesaler and retailer’s managing director, reiterated to shareholders that the company’s fully recovery from the ravages of the COVID-19 pandemic is unlikely to be completed until next year.

“Although our financial results varied quite a bit from month to month, and revenue has yet to be fully recovered, we managed to post strong results for the year,” he said of the year to end-December 2021. “We were able to reduce debt from $9m to $5m, and to contain costs at $95.5m, a manageable 8 percent increase. Gross revenue increased by 22 percent for the year, and reported net profit was $8.2m.

“The pandemic is not over and we expect that it will take until 2023 for the Bahamian economy and Commonwealth Brewery to fully recover. However, we’re in far better shape than a short time ago, and we’re poised for growth.”

He was backed by the BISX-listed firm’s chairman, ex-Central Bank governor Julian Francis, who added: “At the beginning of 2022, there are clear signs that The Bahamas’ economy is on a recovery path. Apart from steady improvements in tourism, foreign direct investment activity has strengthened noticeably, and the Government’s short-term fiscal performance and outlook has been improving – a reliable positive economic indicator.

“I have made the point in the past that Commonwealth Brewery’s business performance can be a faithful indicator of the country’s underlying economic reality. The company’s return to a significant level of profitability in 2021, apart from reflecting effective management of the business during an unprecedentedly difficult time, strongly suggests a rekindling of the economic support on the ground, without which business cannot develop and grow.

“There is still considerable recovery necessary before our business returns to normal levels and further growth. However, we can be cautiously optimistic that the worst of this recent period is behind us. I am convinced that Commonwealth Brewery is better prepared than ever to benefit from the full economic recovery when it comes.”

Commonwealth Brewery previously warned that product shortages and price hikes are “inevitable” due to continued supply chain disruptions post-COVID, despite generating $1.3m in profits for the 2022 first quarter.

“Commonwealth Brewery continued to experience strong growth in net revenue during the period ending March 31, 2022, of plus-20 percent when compared to the same period of 2021. Key drivers for the continued growth were a further easing of COVID-19 related restrictions and continued economic recovery, led by a rebound of the tourism and hotel sector,” the company previously said in a statement.

“Operating expenses increased to $24m for the period, up 14 percent, which is driven by increased sales and increased supply costs. There were continuous disruptions to the global supply chain that lead to higher input costs for the company.

“Commonwealth Brewery continues to show profitability with net profit of $1.3m in comparison to the net loss of $0.3m for the comparative period of 2021,” the statement added. “Commonwealth Brewery remains cautiously optimistic as local COVID economic recovery progresses.

“Management is also closely monitoring its business strategies and taking additional measures to limit the impact of the global supply chain. Still, price increases and out-of-stocks will be inevitable. Commonwealth Brewery will continue to invest in its brands, technology, people and the community as part of its long-term strategy.”

The BISX-listed brewer’s revenues leapt by almost $5m during the 2022 first quarter, rising from $24.244m the year-before to $29.029m. Operating expenses increased by almost $3m, jumping to $24.49m compared to $21.521m. This followed a 2021 full-year in which revenues rose by 22 percent year-over-year.