ThaiBev reports decrease in beer sales volume by 6.1% in first quarter 2011

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Thai Public Beverage Co (ThaiBev) reported the domestic beer market in the first quarter of 2011 was flat as certain customers shifted to consume brown spirits products. Consequently, the overall beer consumption was affected as brown spirits ate in the beer’s market share and created more or less impact to different brands. The shift in consumption led to the decrease in the Company’s beer sales volume in the first quarter by 6.1%. The Company tried to manage cost in the beer segment namely the marketing expenses, which contributed to a slightly improved net loss, it said.

Beer business

For the first quarter ended 31 March 2011, sales revenue was Baht 8,154 million, a decrease by Baht 359 million, or 4.2%, mainly due to a decrease of sales volume and product mix. Total sales volume of beer was 156.4 million litres, a decrease of 6.1%.

Gross profit was Baht 869 million, an increase by Baht 123 million, or 16.5%, mainly due to a decrease in raw material cost and a decrease in depreciation.

EBITDA showed a loss of Baht 71 million,a decrease by Baht 8 million, or 10.1%, mainly due to an increase in gross profit and a decrease in marketing expenses.

Net loss was Baht 265 million, a decrease by Baht 107 million or 28.8%, mainly due to a decrease in EBITDA loss, depreciation and interest expenses.

International business

ThaiBev’s international operations continued to grow with sales increase of 41% in Q1’11, and the net profit increased by 48% when compared YoY.

• ASEAN performance was driven by Chang Beer with growth of over +20%.

• Chang beer sales in the US market grew more than double versus Q1 last year as our distribution in both Thai and mainstream channels continued to grow, and at the same time, marketing activities and support increased.

• IBHL UK and rest of the world sales growth was driven by Chang beer growing over +76%, and the overall Scotch portfolio of single malts, blends, and bulk sales all sharing double digits growth.

• YLQ sales in China almost saw a doubling of sales in Q1 versus last year as distribution coverage continues to grow in the Yunnan province.

Group

For the first quarter ended 31 March 2011, total sales revenue of the Company was Baht 31,029 million, an increase by Baht 1,142 million, or 3.8%, from Baht 29,887 million of the corresponding period of last year, due to an increase of sales revenue from the spirits business of 6.3%,the non-alcoholic beverages business of 9.1% and the food business of 22.6% although there was a decrease from the beer business of 4.2%.

Gross profit was Baht 8,310 million, an increase by Baht 477 million, or 6.1%, due to a higher gross profit from the spirits business of 4.6%, the beer business of 16.5%, the non-alcoholic beverages business of 1.2% and the food business of 17.5%.

Earnings before interest, tax, depreciation and amortization (EBITDA) was Baht 5,009 million, an increase by Baht 97 million, or 2.0%, due to an increase of EBITDA from the spirits business of 1.7%, the beer business of 10.1% and the food business of 13.7% although there was a decrease of EBITDA from the non-alcoholic business of 3.8%

Net profit was Baht 2,988 million, an increase by Baht 327 million,or 12.3%, due to a higher net profit from the spirits business of 7.7%, the non-alcoholic business of 20.6%. and a lower net loss from the beer business of 28.8% although there was a lower net profit from the food business of 39.3%.

Non-Alcoholic Beverages Business

In the first quarter of 2011, sales of non-alcohol business increased by 9.1% due to the rise of sales volume of Oishi beverages, soda water and drinking water. Sales of drinking water and soda continued to yield satisfactory, two-digit growth although such growth was not as high as that of same period last year, where sales significantly increased in the beginning of the sales promotional campaign. For Oishi

18/21beverages, the Company continues launching new products to follow the market trend. Fruitto is the new flavored green tea that Oishi launched in the first quarter, targeting young consumers.

For the first quarter ended 31 March 2011, sales revenue was Baht 1,724 million, an increase by Baht 144 million, or 9.1%, mainly due to an increase of Oishi’s beverages sales. Total sales volume of Oishi beverages, which consist of green tea, black tea, and other non-alcoholic beverages, was 56.5 million litres, an increase of 12.0%. Energy drinks generated sales volume of 1.8 million litres, a decrease of 7.2%. Soda and drinking water generated sales volume of 8.7 million litres and 27.7 million litres respectively, an increase of 23.6% and 38.2% respectively.

Gross profit was Baht 509 million, an increase by Baht 6 million, or 1.2%, mainly due to the increase of Oishi beverages sales. The lower margin was mainly due to an increase in packaging material cost and product mix.

EBITDA was Baht 178 million, a decrease by Baht 7 million, or 3.8%, mainly due to a slightly increase in employee expenses.

Net profit was Baht 129 million, an increase by Baht 22 million, or 20.6%, mainly due to income tax impacts.

Spirits Business

For the first quarter ended 31 March 2011, sales revenue was Baht 20,117 million, an increase by Baht 1,200 million, or 6.3%, mainly due to an increase of sales volume and product mix. Total sales volume of spirits was 132.4 million litres, an increase of 3.5%.

Gross profit was Baht 6,534 million, an increase by Baht 290 million, or 4.6%, mainly due to the increase in sales although there was an increase in raw material cost.

EBITDA was Baht 4,786 million, an increase by Baht 82 million, or 1.7%, mainly due to an increase in gross profit and a decrease in idle costs and marketing expenses.

Net profit was Baht 3,090 million, an increase by Baht 220 million, or 7.7%, mainly due to the increase in EBITDA and a decrease in depreciation and interest expenses.

Food Business

Oishi continued to open new outlets in the first quarter of 2011, which boosted the sales by 22.6% when compared to same period of 2010. However, net profit decreased in the first quarter of 2011 YOY since tax benefit from the loss brought forward was fully-recognized.

For the first quarter ended 31 March 2011, sales revenue was Baht 1,105 million, an increase by Baht 204 million, or 22.6%, mainly due to an increase in number of branches and sales price.

Gross profit was Baht 403 million, an increase by Baht 60 million, or 17.5%, mainly due to the increase in sales although food costs increased in accordance with the variety of foods available.

EBITDA was Baht 116 million, an increase by Baht 14 million, or 13.7%, mainly due to the increase in gross profit although branch rental fees and marketing expenses increased.

Net profit was Baht 34 million, a decrease by Baht 22 million, or 39.3%. mainly due to no more tax benefits from loss brought forward which was fully utilized.

Trends in economy

The overall Thai economy in the first quarter of 2011 remained sound and continued to expand from the last quarter of 2010. However, there were some negative factors which impacted on the economy, e.g. unexpected flooding in the south and price pressure from rising inflation expectation and tightened labor market.

In the first quarter of 2011, overall economy continuously grew by 3.7% from the previous year as a result of expansion of private consumption and investment as well as the export sector. Moreover, Private Consumption index (PCI) increased by 4.8% when compared to the same period of last year. Average consumer price index from January to March 2011 was at 110.0, or a 3 % increase from the same period of last year. Moreover, price of oil continued to increase which contributed to the higher cost of production. Although there was flooding in the south, only certain areas were affected.

The Southern region of Thailand suffered the flood disaster toward the end of the first quarter of 2011. Several provinces were severely flooded, including 2 provinces where the Company’s facilities were located i.e. Nakhon Si Thammarat and Surat Thani. The facility in Nakhon Si Thammarat was not damaged from the flood. However, for the facility in Surat Thani province, the operation was temporary closed for restoration and the stocks in the distillery were damaged. In this regard, our industrial all risk (IAR) and business interruption (BI) insurance policies cover the entire amount of damages at the distillery. The Company already allocated products from other distilleries to sell in the related area during the shutdown period of the distillery in Surat Thani.