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Thai Beverage Public Company Limited’s Latest Earnings: Healthy Growth Seen, But Caution’s Needed

Thai Beverage Public Company Limited (SGX: Y92) had released its fiscal first-quarter earnings for the three months ended 31 March 2015 yesterday evening.

As a quick introduction, Thai Beverage is a manufacturer and distributor of spirits, beer, non-alcoholic beverages and food. Currently, the company’s business resides predominantly in Thailand, but it has a goal of growing international sales to 50% of total revenue by 2020.

With that, let’s dive into the company’s latest figures.

Key financials

Thai Beverage’s total revenue for the quarter grew by 11% year over year to THB 45.7 billion as a result of broad-based growth across all segments. The higher sales flowed nicely through the bottom-line as the firm ended up making THB 6.575 billion in profit attributable to shareholders for the quarter, up 10% from the same quarter a year ago.

Consequently, Thai Beverage’s earnings per share had edged up by 8% from THB 0.24 a year ago to THB 0.26.

On the cash flow front, Thai Beverage ended its fiscal first-quarter with THB 5.311 billion in operating cash flow. With THB 1.263 billion in capital expenditures, Thai Beverage thus managed to pull in THB 4.048 billion in free cash flow (free cash flow is obtained by subtracting capital expenditures from operating cash flow). For some perspective, the selfsame figures a year ago were THB 6.574 billion (operating cash flow), THB 1.05 billion (capital expenditures), and THB 5.524 billion (free cash flow), respectively.

But while Thai Beverage has done a nice job with growing its top- and bottom-lines and generating cash flow, investors might want to keep a close watch on its balance sheet.

The firm ended 31 March 2015 with a net-debt position of THB 41.8 billion (where net-debt refers to total borrowings minus total cash). Although that’s a significant improvement over the net-debt position of THB 55.46 billion seen a year ago, Thai Beverage still has a hefty amount of borrowings there.

Business highlights

Thai Beverage has four business segments (which are classified according to the product categories that it offers): Spirits; Beer; Non-alcohol Beverages; and Food.

Quarterly revenue from the Spirits segment, which is Thai Beverage’s largest, grew 9.9% year over year to THB 29.56 billion on the back of an increase in sales volume. The segment’s profitability was also healthy as its EBITDA (earnings before interest, taxes, depreciation and amortisation) and net profit had stepped up by 7.8% and 7.2% to THB 7.641 billion and THB 5.746 billion, respectively.

Beer is Thai Beverage’s second largest segment and its revenue for the quarter jumped by 17.5% to THB 10.53 billion from a year ago. Management attributed the strong showing to higher sales volume too. With lower material, packaging and energy costs, the Beer segment’s EBITDA and net profit enjoyed year over year spikes of 27% (to THB 931 million) and 41% (to THB 595 million) respectively.

Non-alcohol Beverages had turned in the weakest performance. Revenue had grown by only 7.9% to THB 4.0 billion while its net profit actually sank from –THB 195 million a year ago to –THB 369 million (yes, Thai Beverage had made a loss in the segment).

We’re down to the last segment – Food – and the numbers here aren’t that pretty either. An 8.2% year over year climb in revenue to THB 1.64 billion couldn’t benefit Thai Beverage much as the segment’s net profit had shrank by 76.1% to THB 11 billion.

As Thai Beverage has a target of wanting to grow its international business, that would also be an area to keep an eye on. In the first quarter of 2015, overall revenue from the international business grew by 4.5% in value from a year ago, led primarily by growth in beer. Besides that, Thai Beverage did not share much financial details about its international venture. For some perspective, Thai Beverage ended 2014 with just 5% of its total revenue of THB 162.8 billion coming from outside Thailand.

A Fool’s take

It seemed like Thai Beverage had a nice quarter as it managed to post stronger sales and higher profits, though a number of its business segments (mainly Non-alcohol Beverages and Food) were still plagued by poor profitability.

Investors might want to watch the progress of Thai Beverage’s international business as a 4.5% growth rate in value – the growth it reported in the earnings release – would fall way short of what’s needed to propel international revenue to 50% of the firm’s total business. The highly-geared balance sheet that Thai Beverage has is also one area to watch, though the company’s putting in effort to reduce its financial risks by paring down debt.

At Thai Beverage’s current share price of S$0.755, it’s valued at roughly 22 times its trailing earnings.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore writer Chong Ser Jing doesn't own shares in any company mentioned.