Thai Beverage's FY2020 Financial Highlights: Pandemic Impacts Business

Thai Beverage Public Company Limited (SGX: Y92) is a leading beverage company in Southeast Asia and the largest of its kind in Thailand.

The company has four main business segments — spirits, beer, non-alcoholic beverage, and food.

Some of the famous brands that Thai Beverage owns include Chang beer, Saigon beer, Oishi green tea, and 100PLUS isotonic drink.

Yesterday, Thai Beverage announced its financial results for its full-year ended 30 September 2020 (FY2020).

Let’s find out how each of its business segments performed and how much in dividends the company has declared for the year.

TL;DR: Thai Beverage’s FY2020 Financial Results

• Thai Beverage’s total sales declined by 5.2% year-on-year to THB 253.5 billion due to the COVID-19 pandemic.
• Profit attributable to shareholders also tumbled, falling 2.2% to THB 22.8 billion.
• However, attributable profit from normal operations (which excludes the beer business restructuring costs) increased by 9.2% to THB 25.4 billion.
• Thai Beverage declared a total dividend of THB 0.46 per share for FY2020, down 4% year-on-year.
• At Thai Beverage’s share price of S$0.735 at the time of writing, it has a price-to-earnings (P/E) ratio of 18x and a dividend yield of around 3%.

How Much Did Thai Beverage Make for the Year?

Revenue

For FY2020, Thai Beverage reported total sales of THB 253.5 billion, a fall of 5.2% year-on-year.

The decline was due to lower sales from its beer, non-alcoholic beverages, and food businesses. However, higher sales from its spirits business slightly mitigated the fall.

Thai Beverage’s biggest contributor to revenue for the year was the spirits business at 46.3%, followed by beer (42.2%), non-alcoholic beverages (6.4%), and food at 5.2%.

Spirits saw a sales improvement of 2.2% year-on-year to THB 117.3 billion due to an increase in sales volume.

Meanwhile, the beer business’ revenue tumbled 11.3% to THB 106.9 billion due to a temporary ban on alcoholic beverage sales in Thailand from April to early May and lockdowns in both Thailand and Vietnam.

Total sales volume of beer (including Sabeco’s beer) was 2,357.7 million litres, a decline of 12.7%. Vietnam legislating zero tolerance for drink driving also led to the fall.

Thai Beverage is a major shareholder in Sabeco, a Vietnam-based beer brewer, which was acquired at the end of 2017. Sales volume, excluding Sabeco’s beer, is lower by 0.9%.

Gross and Net Profit

With Thai Beverage’s lower total sales, its gross profit fell 3.3% to THB 74.9 billion.

Profit attributable to shareholders also tumbled, falling 2.2% to THB 22.8 billion.

However, excluding costs and deferred tax utilisation related to its beer business restructuring, attributable profit from normal operations would have increased by 9.2% to THB 25.4 billion.

The improvement was due to:

1) Higher profit from its spirits business, even with a temporary ban on alcoholic beverage sales in Thailand.

2) Satisfactory profit growth from Thai Beverage’s domestic beer business due to cost control measures and the successful management of the COVID-19 situation in Thailand.

3) Profitability at Thai Beverage’s non-alcoholic beverages segment.

Balance Sheet

Now, let’s turn our attention to Thai Beverage’s balance sheet strength, which improved for the year.

As of 30 September 2020, the company had THB 216.7 billion in total debt, and THB 34.7 billion in cash and cash equivalents, translating to a net debt position of THB 182.0 billion.

In contrast, at the end of September 2019, it had THB 195.2 billion in net debt.

Even though Thai Beverage ended off FY2020 with lower net debt, its gearing ratio (or liability-to-equity ratio) is still high at 1.42 times.

How Much Would Thai Beverage Shareholders Get as Dividends?

Thai Beverage has declared a final dividend of THB 0.36 per share for FY2020, up 9% from THB 0.33 per share dished out a year ago.

With the FY2020 interim dividend of THB 0.10 per share already paid out, the total dividend for FY2020 comes to THB 0.46 per share, which is lower by 4% year-on-year.

What’s Thai Beverage’s Outlook?

The COVID-19 pandemic has impacted Thai Beverage’s business due to the lockdown measures.

However, from May, the pandemic prevention measures have been eased and economic activity began to resume and gradually recover. An exception is the tourism sector, which contracted sharply due to travel restrictions on foreign tourist arrivals.

To boost domestic tourism and purchasing power, the Thai government has continued to undertake stimulus measures.

Thai Beverage added that the “domestic beverage industry has begun to recover, leading to an improvement in sales, which began to grow again in the last quarter of this fiscal year”.

It looks like it could take some time for Thai Beverage to fully recover from the setback COVID-19 has caused. I’m also wary of the company’s weak balance sheet amid the harsh conditions.

At Thai Beverage’s share price of S$0.735, it has a price-to-earnings (P/E) ratio of 18x and a dividend yield of around 3%.

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