Short memory

Royal Unibrew (selling under the brands Faxe and Ceres) said on 12 August that it agreed to sell its three Caribbean breweries to the Dominican brewery CND for a total consideration of USD 31 million.

The sales price is equal to the carrying amount of the shares in Royal Unibrew’s breweries in Dominica, St. Vincent and Antigua.

The deal comprises 76.5 percent in St Vincent Breweries, 93 percent in Antigua Brewery, 75 percent in Antigua PET Plant and 58 percent in Dominica Brewery.

Furthermore, Royal Unibrew and CND entered into an agreement for the licensed production of Royal Unibrew’s Vitamalt.

The transaction is subject to approval by the government in Antigua and is expected to be finalised at the end of 2009.

In December 2006 Royal Unibrew had spent USD 15.3 million including USD 7.0 million in debt on two island breweries – Antigua and Dominica – which had an enterprise value of USD 26.5 million. In 2005, the two breweries had a net revenue of USD 13 million and a profit before tax of USD 1.3 million.

Market observers wondered at the time if Royal Unibrew would be up to the task of running a beer business in the Caribbean. Island economies are notoriously wobbly, especially if they rely on income from tourism. If this were not bad enough, brewers have to content with smuggling too. An island beer monopoly in the Caribbean is often worth very little as many islanders have made it their business to bring in cheaper beer from neighbouring islands.

However, the intricacies of island economies must have been the least of Royal Unibrew’s worries. Since July 2007, the brewer’s shares have tumbled. In August 2007 the brewer’s stock stood at DKK 780 (EUR 105), one year later it stood at DKK 500 (EUR 67). On 17 August 2009, the share price was DKK 126 (EUR 16.90) and analysts said it could drop below DKK 100.

The company reported revenues of DKK 4,178 million (EUR 562 million) during the fiscal year ended December 2008, an increase of 7.65 percent over 2007. The operating loss of the company was DKK 300.23 million (EUR 40 million) during the fiscal year 2008, as against an operating income of DKK 264.30 million during 2007.

Total net interest-bearing debt at the end of 2008 amounted to DKK 2.2 billion (EUR 295 million).

To reduce debt, the company announced in March 2009 that it would sell its brewery in Koszalin to the Polish brewery group Van Pur for DKK 35 million (EUR 4.7 million). Last year, Royal Unibrew closed one of its Danish breweries in Aarhus.

The company was known as Bryggerigruppen until May 2005.