Thaibev Q3 for period ended June 2017

For Spirits segment, the total sales revenue dropped -0.4% to Baht 45,284 million but net profit is still +2.4 %. Rise in net profit from normal operation excluding F&N recognition of fair value gains on financial assets is Baht 6,795 million. Recognition of F&N's fair value gains on financial assets is Baht 8,498 million. Thaibev is entering into an asset S&P with Yum Restaurant to acquire more than 240 existing and a number of developing KFC stores in Thailand. This is valued at Thai Baht 11.3 billion including VAT. This will complement ThaiBev's soft drink segment.

Beer Business
For the third quarter ended 30 June 2017, sales revenue was Baht 13,781 million, a decrease of Baht 1,051 million or 7.1%. Total sales volume of beer was 205.3 million litres, a decrease of 8.7% due to the continual effects from mourning period in Thailand. Gross profit was Baht 3,262 million, an increase of Baht 1 million, or 0.03%. This was mainly due to decrease in bottle and raw material costs, although there was a decrease of sales volume. Earnings before interest, tax, depreciation and amortization (EBITDA) was Baht 937 million, a decrease of Baht 335 million or 26.3%. This was mainly due to an increase in advertising and promotion expenses. Net profit was Baht 606 million, a decrease of Baht 311 million or 33.9%. This was mainly due to a decrease in EBITDA. 

Non-Alcoholic Beverages Business  
For the third quarter ended 30 June 2017, sales revenue was Baht 4,349 million, a decrease of Baht 187 million or 4.1%. A production and distribution agreement for an OEM sports drink was expired since August 2016 which caused a decrease in sales volume of 1.3 million litres. The continued products was 432.2 million litres, a decrease of 10.0 million litres or 2.3%. There was a decrease in sales volume of carbonated soft drink of 8.0 million litres or 10.5%, ready to drink tea of 3.3 million litres or 4.4%, Jub Jai of 2.4 million litres or 17.2% and   100 Plus of 0.8 million litres or 28.6% and other drinks of 0.5 million litres or 10.7% although there was an increase in sale volume of drinking water of 5.0 million litres or 1.9%. Gross profit was Baht 1,558 million, a decrease of Baht 143 million or 8.4%. This was mainly due to a decrease in sales.  

Earnings before interest, tax, depreciation and amortization (EBITDA) was Baht 43 million, a decrease of Baht 13 million or 23.2% from EBITDA of Baht 56 million. This was mainly due to a decrease in gross profit although there was a decrease in advertising and promotion expenses. 

Net loss was Baht 215 million, an increase of Baht 41 million or 23.6% from net loss of Baht 174 million. This was mainly due to a decrease in EBITDA. 

Food Business  
For the third quarter ended 30 June 2017, sales revenue was Baht 1,727 million, a decrease of Baht 41 million or 2.3% due to slow down consumption although there were more new stores. Gross profit was Baht 785 million, an increase of Baht 57 million or 7.8%. This was mainly due to an increase in selling price and cost efficiency. 

Earnings before interest, tax, depreciation and amortization (EBITDA) was Baht 162 million, a decrease of Baht 11 million or 6.4%. This was mainly due to an increase in rental expenses from opening new stores although there was an increase in gross profit. 

Net profit was Baht 32 million, an increase of Baht 3 million or 10.3 %. This was mainly due to a decrease in depreciation from fully depreciated asset. 

Financial Situation
Net profit excluding F&N/FCL was Baht 17,546 million, a decrease of 5.6% or Baht 1,036 million.

With the acquisition of KFC restaurants, ThaiBev will take on more debts to finance this deal, further weakened the financial position but this is a cash rich business. We feel that the acquisition will boost the revenue in the 2018 but short term wise will show some weakness. This may present an opportunity for JC Fund to acquire more shares in the company.

The Financial Ratios show Current Ratio was down as there is a decrease in cash and increase in short term loan. Liquidity to Equity Ratio was down as decrease in long term borrowings and increase in retained earnings and profit for the period.

As mentioned before, overall the business is faced with headwinds both domestically in Thailand and from international businesses as well. JC Fund is confident of the business' prospect and will continue to acquire more shares.