28 February 2013

Thai Beverages 4Q2012 Result Released 27 Feb 2013

Thai Beverages released its 4Q2012 result yesterday. Below is the snapshot of the financial results:

As you can see from the picture above, the net profit rose by 140% to 28B Thai Baht. This is a very good result partly due to:

  • No more deduction from loss from severe floodings in Thailand
  • Thai Beverages acquired stakes in F&N and increase its share of profit of associates to 13B Thai Baht. 
  • However, the finance costs rose to 208% to 1.4B Thai Baht compared to years ago. 
  • EPS rose 135% to 1.13Thai Baht from year ago. 
  • It declared a final dividend of 28cent Thai Baht to be paid on 22 May 2013. 
Balance Sheet wise, you may refer to the picture below:

We can find some financial ratio here:

  • Current Ratio => 1.5X, still a quite healthy figure. It dropped significantly compared to last year due to increase of Bank Overdraft and Short Term Borrowings to purchase stakes of F&N last year. 
  • Long Term Debt-To-Equity Ratio => 1.08X, a bit high Ratio. But it is due to long term loans from Financial Institution to purchase stakes of F&N last year. 
  • ROE (Net Profit / FY2012 NAV Value) => around 35%, a very encouraging figure, due to consolidation of shares of profit from F&N as well as Serm Suk. 
Cash Flow wise, we could have a clear picture by looking at the image below:

We can get the summary of the cash flow statement here:

  • CFO is 19.7B Thai Baht
  • CFI is -94.9B Thai Baht due to acquisition of F&N of around 90B Thai Baht 
  • CFF is 75B Thai Baht due to Long Term Loan of around 81.6B Thai Baht

The cash flow is still manageable due to Free Cash Flow of around 15B Thai Baht for last year if we excluded the one off investment of F&N. We also should take into consideration of increase of Interest Payment for next FY as well as future loan repayment. Nonetheless, The Company still propose a decent dividend of around

You may also see the comments from management for the market outlook as well as the last year performance below which I copied from the financial statement released yesterday:

In the year 2011, Thai Beverage Logistics Co., Ltd.(TBL), a direct subsidiary wholly owned by the Company, acquired Sermsuk Public Company Limited (Sermsuk), a Thai company currently listed on the Stock Exchange of Thailand. The Company has included the assets and liabilities of Sermsuk in the consolidated statements of financial position since 30 September 2011 and the results of operations and cash flows in the consolidated statements of income and cash flows respectively since 1 October 2011. Sermsuk¡¯s operations were recognized under the non-alcoholic beverages business segment. The consolidated financial statements for the year ended 31 December 2011 was restated to reflect the fair values of Sermsuk as at the acquisition date in accordance with Thai Financial Reporting Standard no. 3 per independent appraisal report which was finalized in the third quarter of 2012. Goodwill from the acquisition per previously assessed and reported at Baht 4,100 million was restated to Baht 3,975 million. Details of the restatement were disclosed in the note 5(a) to the financial statements of this year.

For the year ended 31 December 2012, the standard corporate income tax in Thailand has been reduced from 30% to 23% in an effort to promote the competitiveness on the global market.

Starting from 1 April 2012, the 300-baht daily minimum wage was implemented in seven provinces of Thailand, Bangkok, Nonthaburi, Pathum Thani, Samut Prakarn, Samut Sakhon, Nakhon Pathom and Phuket. The wage increased between 35.7 to 39.5 percent. The minimum wages in other provinces went up between 39.5 to 40 percent but was still lower than Baht 300 and will be further increased to Baht 300 with effective on 1 January 2013. Total effects to the Company salary and wages in FY2012 were about Baht 100 million.

The Ministry of Finance declared an increase in the excise taxes of certain categories of alcoholic beverages with effect from 22 August 2012 onwards. The excise tax is imposed by one of two methods, whichever is higher: an ad valorem rate or a specific rate. The ad valorem rate is a percentage of the ex-factory price. The specific rate is an amount in Baht on every one litre of pure alcohol of the product. For white spirits, the specific rate rose from Baht 120 to Baht 150 per litre of pure alcohol and was higher than the ad valorem rate which did not change. For compounded spirits, the specific rate rose from Baht 300 to Baht 350 per litre of pure alcohol and was higher than the ad valorem rate which did not change. For brandy, the ad valorem rate rose from 48% to 50% of ex-factory price and was higher than the specific rate which did not change. There were no changes of excise taxes to beer and other special spirits. The new excise taxes caused a rise in the Company¡¯s excise tax cost of white spirits, compounded spirits and brandy of about 25%, 16.7% and 4.2% respectively. However, the Company passed on the tax increase to its customers directly.

In the third quarter of 2012, International Beverage Holdings Limited (IBHL), a direct subsidiary wholly owned by the Company, acquired about 29% ordinary shares of Fraser and Neave, Limited (F&N), a Singapore company currently listed on the Singapore Exchange Securities Trading Limited. IBHL has transferred all shares of F&N to Interbev Investment Limited (IBIL), its wholly owned subsidiary, in the fourth quarter of 2012. The principal activities of F&N are: production and sale of soft drinks, dairy products, and beer; development of and investment in property; and printing and publishing which are carried out through subsidiary, joint venture and associated companies. The Company has recognized F&N operating results in the consolidated financial statements under the equity method by total instead of by business segments from the third quarter of 2012 onwards.

Outlook for 2013

The economy of Thailand in the first quarter of 2012 saw recovery from the flood disaster, resulting in the improved manufacturing sector, consumption, and investments. However, in the middle of the year, the sovereign debt issues of countries in the EURO zone affected export and manufacturing sectors, while consumption and investment of private sector saw continuous expansion due to the rise of minimum wages and salary of civil officers. In the third quarter of 2012, the Thai economy continued to expand mainly due to domestic spending. Export remained affected from the EURO crisis and the slowdown of China’s economy. Nevertheless, the last quarter of 2012 saw improved expansion of the Thai economy because of the increasing buying power and consumer confidence. The export sector still suffered the effect from the global economic slowdown; however, signals indicated certain stabilizing industries.
The domestic beverage business in the first quarter of 2012 saw recovery from the flood disaster. Facilities began to restore and resume the production process. During the first half of 2012, agents and stores were alarmed by the rumor on excise tax increase for alcohol beverages, resulting in the higher purchase orders for stocking purposes. Afterwards, when the government announced the excise tax increase in August, it was found that sales were impacted in the last quarter as consumers were adjusting to the increased price of the products.

1. Press Release on Economic and Monetary Conditions for January - December 2012 and the fourth quarter of 2012 by Bank of Thailand
2. Monthly Economic Report (January - December 2012) by the Fiscal Policy Office

Overall Business

In 2012, total sales revenue of the Company had satisfactory growth of 21.8% comparing YoY, attributable to the increase in sales revenue of all segments i.e. spirits, beer, non-alcohol beverage, and food. The group also saw strong growth in net profit of 140.3% from good performance in spirits and non-alcoholic business as well as F&N operating results.

Spirits Business

The spirits business of ThaiBev in 2012 has prepared for the excise tax increase by partly adjusting the product price in the first half of the year to reduce the impact. After the official announcement on excise tax increase in August, the Company made another price adjustment to cover such tax increase. This year, the Company maintained the leadership in the domestic spirits business. Sales of spirits business rose by 9.9 percent when compared to last year due to the selling price increase. Total sales volume of the spirits business increased by 3.3 percent from the growth of both white and brown spirits. Net profit of the spirits business in 2012 was Baht 18,744 million, an increase of 40.4 percent when compared YoY.

Beer Business

The beer business was rather flat although sales volume grew by 4.9 percent when compared to the previous year. However, the increase in costs of raw materials as well as advertisement and promotional spending resulted in the loss amount of Baht 1,162 million of the beer business in 2012.

Non-alcohol Business

The non-alcohol beverage business of ThaiBev encountered certain issues in early 2012 due to the flooded facilities in late 2011. Consequently, production of some products, especially those of Oishi, was interrupted and goods in certain packaging were not available in the market. The Company solved the issue by outsourcing production and relocated manufacturing to the production lines unaffected from the flood to relieve the product shortage. Consequently, production cost increased in the first half of 2012. However, the impacted production bases of Oishi resumed operations in the third quarter of 2012.

Sales of non-alcohol beverage in 2012 mainly derived from Sermsuk and Oishi. Sermsuk launched its carbonated soft drink under “est” brand, the trademark of which was registered by Sermsuk. “est” offered cola and flavored carbonated soft drinks through the distribution network of Sermsuk. In addition, the distribution network of Sermsuk was a key contributor to the expansion of Oishi green tea to the new market with its latest product i.e. “Returnable Bottle Oishi Green Tea”.

The non-alcohol business in 2012 saw sales of Baht 28,997 million, an increase of 167 percent YoY, mainly due to the integration of Sermsuk business after the acquisition of shares in October 2011. Sales volume of Oishi beverages and drinking water increased by 8.7 percent and 14.9 percent respectively, but sales volume of soda water decreased by 11.3 percent. Net profit of the non-alcohol business was Baht 417 million, or an increase of 189.9 percent when compared to the losses in 2011.

Food Business

The Company expanded its food segment as it entered the snack market via the launch of Japanese style fried seaweed under the brand “Onori” in April 2012. Investment was made in advertisement and promotional activities in the early period following the product launch to raise brand awareness.

Sales of the food business for the year 2012 were Baht 5,319 million, or an increase of 28.9 percent when compared to the previous year due to the expansion of food outlets and the increase in selling price. Oishi expanded a total of 44 outlets in 2012. Net profit of the food business was Baht 66 million, or a decrease of 38.3 percent due to the increase of raw material costs and the investment of “Onori” brand. In this regard, the performance of food business, exclusive of the new snack business, saw an increase in net profit of 57 percent.

International Business

In 2012, ThaiBev’s international business reported sales growth of 28%

The performance of business by geographic area:
• UK & Rest of the World - Sales revenue continued to grow 14% from Scotch whisky sales and other new products introduced into key markets
• Asia excludes China - Good performance was mainly driven by Chang Beer in ASEAN market, with an increase in sales value of 78%
• YLQ (Chinese spirits in China) - Sales and margin of Chinese spirits continued to improve from better mix of mid and high end products. Sales value grew by 8%
• USA - This region’s sales revenue continued to improve over last year by 15% mainly from the growth of Scotch whisky, other spirits & Chang Beer


We should monitor the synergies created from acquisition of F&N as well as its further expansion plan in Asia Pacific region. I believe now the group is focus more on Non-Alcoholic division to further boost its revenue to another record high as the Non-Alcohol division is going to take over Beer division as #2 Revenue Generator after Spirits business. Another thing we should take note is the demographic changes as well as consume behavior, as I noticed that more and more people turns to "healthier" drinks such as no-carbonated soft drinks. Nonetheless, I believe the group will still try to push its Chang Beers to Asean countries via F&N distribution networks in Asean region. I hope it can make a turnover within 3 years to further improve its valuation by research analysts and investors.

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