Brewing green

IN a world where the use and management of natural resources by businesses and organisations have come under increasing scrutiny, Carlsberg Brewery Malaysia Bhd’s RM200mil investment in advanced brewing technologies is starting to make an impact.

The company embarked on its brewery transformation programme in 2022 through modernising bottling and canning lines, as well as introducing high-precision filtration systems designed to upgrade packaging capabilities, expand capacity and improve efficiency.

This transformation was completed at the end of 2024. The goal is to have zero carbon emissions in brewery operations by 2032.

Carlsberg Malaysia is now benefitting from increased production capacity and improved efficiency. More importantly, the introduction of modern technology to the Malaysian brewery operations – established in 1971 – is helping the company reach its sustainability goals of reducing energy and water consumption.

Between 2022 and 2025, energy intensity has been reduced by 23% to from 18.47 kWh/hectolitre (hl) to 14.22 kWh/hl while water intensity has been reduced by 22% from 3.4 hl to 2.66 hl.

This has saved 8.53 million kWh or the equivalent of powering 2,000 homes for one year and 1.51 million hl of water, or 61 Olympic-sized pools.

Carlsberg Malaysia corporate affairs and sustainability director Pearl Lai shares that the brewery transformation programme has definitely contributed to the bottomline.

While admitting that the share price has underperformed, she noted that the company continues to pay out dividends, with the latest being a dividend of 21 sen per share announced for the second quarter ended June 30, 2026 (2Q26).

Results for the quarter saw net profit growing 1.2% to RM83mil and revenue by 5% to RM515mil compared to the same quarter a year ago.

This followed a 24 sen per share dividend declared for 1Q26 after net profit grew 4.7% to RM99mil on the back of RM706mil growth in revenue.

Last year, the company paid a record dividend of RM339.4mil, or RM1.11 per share, representing a 90% payout ratio on an 11.4% rise in net profit to a record RM375.64mil. This was despite a 4.9% drop in revenue to RM2.26bil for the financial year ended Dec 31, 2025 (FY25).

For FY26, analysts point to new brands coming into the market, including through the deepening partnership between parent Carlsberg A/S, which owns 51% of Carlsberg Malaysia, and Sapporo Breweries Ltd.

This move will address changing market trends while the company continues to focus on investing in its brands, brewery capabilities and digital transformation initiatives.

It is also working to manage production costs in the face of supply chain constraints due to geopolitical factors such as the Middle East conflict.

Although the shares are undervalued, analysts reporting on the company shortly after it released 2Q26 results in mid-August remain positive on the outlook despite the challenging consumer landscape.

They point to the stock’s attractive yield and earnings visibility, especially from the domestic market, which mitigate the weaker outlook of the Singapore market.

According to UOB Kay Hian Research in a note dated Aug 17, the stock offers a solid dividend yield of 6.8% to 7.7% for FY26 to FY28, based on a 90% payout.

The company’s environmental, social and governance (ESG) credentials received a boost in March when it was upgraded to AAA from AA by MSCI ESG Ratings. This takes it to the highest rating band under the MSCI metric’s assessment for managing financially material ESG risks and opportunities relative to industry peers.

It is also among the 26 companies in the Consumer Products & Services category to have achieved a four‑star ESG rating under the FTSE4Good Bursa Malaysia Index in 2025.

“This is a huge recognition,” Lai says of the MSCI upgrade.

She believes that while this may not matter to consumers in general, foreign funds looking to the growing economy will take note of these rankings and of the company’s track record over more than half a century of operations in Malaysia.

Over the longer term, Lai says the company will continue to work on premiumisation of its stable of brands, as well as portfolio expansion, which includes low or zero-alcohol products targeted at the younger generation among whom alcohol consumption has dropped.

Lai says the business continues to evolve and in the post-Covid-19 years, is stressing more on sustainability, which also includes the company’s flagship Top 10 Charity Campaign raising funds for vernacular Chinese schools since 1987.

Carlsberg Malaysia supply chain director Joel Solomon says the company continues to explore options in how to reduce carbon emissions, as this involves optimising energy sources.

Currently, brewery operations run on natural gas, while electrical and biomass boilers have been considered.

“Decarbonisation is a long journey and we have to be mindful of the energy sources as our operations are surrounded by residential neighbourhoods,” he says.

That is just the external ­considerations.

The internal considerations include how to make operations more efficient by reducing energy consumption and wastage, even as the beer is already being brewed sustainably.

The company also runs a bottle return programme in which 96% of bottles from food and beverage establishments in Peninsular Malaysia are returned for them to be refilled after undergoing a sanitisation process.

This works to lower costs while ensuring less use of glass.

Joel says an important factor to take into consideration is human behaviour and how to adapt to circumstances such as the super El Nino in which water resources will be affected due to prolonged dry weather.

Lai says no organisation or business will have the answers to the myriad ESG issues.

There are the costs and benefits that a listed company answerable to shareholders have to weigh, and while options are explored, they have to be considered based on whether the infrastructure is available.

“I think the balance between innovation as well as infrastructure is a big question mark. But in our brewing operations we are very much advanced in terms of how we’ve decarbonised, but the whole value chain may not be as ready,” she says.

Globally, Carlsberg’s decarbonisation initiatives are robust and adapt to different countries’ priorities.

Lai says the innovation and infrastructure must go hand in hand and must be packed at the right price point, otherwise, this will not go far.