The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Commonwealth Brewery says it has “successfully challenged” a $1.156m tax demand from the Government and is now awaiting the authorities’ next move.

The vertically-integrated, BISX-listed brewer, wholesaler and retailer detailed its arbitration win over disputed Business Licence fees relating to stock transfers between different group entities in its just-released 2022 annual report.

“As of December 31, 2022, 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,” management informed shareholders during an analysis of its 2022 annual results.

“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.” This effectively means that the ball is in the Government’s court, and itself - along with the Department of Inland Revenue - must make the next move.

No further details were provided on the arbitration proceedings, and it appears likely that the bank guarantee was required to provide the Government with certainty that the tax liability would be paid if it was successful. The guarantee was said to have been “issued pending the outcome of arbitration” and “the matter is still pending as of the date of issuance”.

Elsewhere, the BISX-listed brewer warned that cost increases and inflation generally will continue to challenge margins, profits and its overall business. “2023 will be another challenging year, as we will continue to face higher costs and inflation across our operations. We will address these challenges by leveraging our commercial programmes, tools and capabilities, while maintaining investments and our objective of driving sustainable, profitable growth,” it added.

Julian Francis, Commonwealth Brewery’s chairman, and a former Central Bank governor, said 2022 saw the company generate its highest-ever revenues since it became a public company in 2011. “The 15.6 percent improvement in Commonwealth Brewery’s gross revenue to $135m exceeded the company’s 2018 performance, which had been the highest since the company’s public debut in 2011,” he told investors.

“The result reflects the Bahamas’ underlying economic expansion as well as Commonwealth Brewery’s ability to maintain a commanding position in the beverage sector, which is impressive considering the number of significant participants who have entered the space since 2011....

“Commonwealth Brewery continues the process of re-tooling and adapting to the evolving Bahamian economy. I am satisfied to say that Commonwealth Brewery is as well poised as it has ever been over the past five years - in terms of the quality and reach of the company’s commercial infrastructure, and the size and structure of its professional team - to embrace new commercial opportunities as they occur. I have confidence they will extract maximum profits from this growth, should it come about.”

The BISX-listed brewer’s management, in their discussion of the group’s financial performance, added: “Commonwealth Brewery’s revenue increased by $20m, or 19 percent, at the end of the year compared to the previous period. This increase was driven by double-digit growth of our premium beer, malt and spirits categories, whilst we struggled in wines due to lack of supply.

“Hotels and other on-premises channels grew fastest thanks to the rebound in the tourism sector, whilst we also realised double-digit growth in our retail channel. The underlying product price mix also contributed to revenue growth, through assertive pricing and our premium strategy.

“Commonwealth Brewery also successfully deployed part of the overall digital transformation strategy with the introduction of the digital B2B (business to business) platform, Kalik Shop, and OASIS, our new POS (point of sale) system for retail. The two projects were among the key highlights for the year, ensuring a future-fit business with better services and insights,” management added.

“Total operating expenses increased by $16m during the year, an increase of 16 percent but still less than revenue growth, which improved profitability. Commonwealth Brewery was impacted by continued pressure on input costs, driven by the aftermath of the pandemic and overall global inflation. However, the company was able to identify specific cost mitigations and gross savings to offset inflationary pressures and restore profitability.”