In 2012 profits fell 17 percent to 1.0 billion rupees because canned Carlsberg beer had to be imported from India and Vietnam because canning capacity was not enough.
"This was at a considerable cost to the Company and contributed significantly to the reduction in profitability along with other cost increases in both manufacturing inputs & overheads," chairman L C R de C Wijetunge told shareholders in the annual report.
"To make matters worse, the duty on imported beers increased by 100 percent during the year."
"During the year the Company completed upgrading its brewing facilities. What remains now is the upgrading of its canning & bottling facilities and supporting infrastructure.
"Once these are done, the Company will once again be in a position to supply demand in full via the local production."
On March 31 and October 2012 there had been two duty increases. With the duty and some increase in volume, turnover was up 26 percent for the year.
Sri Lanka raised taxes to cover state spending as import volumes fell.
Wijetunge said the firm had become the third largest tax payer in the country giving 14.7 billion rupees to the Treasury.
Wijetunga said Lion Brewey was charged income tax at 40 percent, compared to 28 percent for other companies.