Breaking Down Thai Beverage Public Company Limited’s Earnings Growth in the 1st Half of 2016

Last week, I wrote an article about Thai Beverage Public Company Limited’s (SGX: Y92) sources of profit. In the first half of 2016, Thai Beverage had earned 13.11 billion baht in profit (excluding contributions from its associated companies Fraser and Neave Limited (SGX: F99) and Frasers Centrepoint Ltd (SGX: TQ5)).

Thai Beverage has four business segments, namely, Spirits, Beer, Food, and Non-Alcoholic Beverages. The Spirits segment dominated with an 83% share of Thai Beverage’s total net profit (again, excluding contributions from the Fraser entities). This is followed by the Beer segment at 19%, Food at 5%, and a -7% from the loss making Non-Alcoholic Beverages.

The company managed to achieve 16% profit growth during the first half of 2016. In here, I want to look at the sources of Thai Beveraege’s profit growth. Doing so can help investors gain a better grasp on the company’s future opportunities and risks.

Source: Thai Beverage earnings report

While the Spirits segment accounted for the bulk of Thai Beverage’s profit and showed 4.2% growth in litres sold, its net profit growth was the slowest at just 5.1%.

The standout performers were the Beer and Food segments. The former grew its net profit by 238.8% while the latter enjoyed a tremendous 644.4% spike in net profit. The Non-Alcoholic Beverages segment is still loss-making as mentioned, but its loss had narrowed from 978 million baht in the first half of 2015 to 428 million baht.

Thai Beverage’s management attributed the growth in the Beer segment to consumers’ acceptance of the company’s launch of the Chang Classic rebranding campaign last August; sales volume in the Beer segment had jumped by 61.7%.

In the Food segment, Thai Beverage had diversified from Japanese restaurants with the establishment of restaurants serving other cuisines in the first quarter of 2015; this helped drive growth in the segment in the first half of 2016.

Thai Beverage’s spending on promoting its products within the Non-Alcoholic Beverages segment continues to be high (this is seen from the segment’s Selling, General & Administrative expenses rising from 3.88 billion baht in the first half of 2015 to 4.04 billion baht). But, overall expenses as a percentage of revenue has declined.

Thai Beverage had grown consumption in most of its Non-Alcoholic Beverages sub-segments. All told, sales volumes for non-alcoholic beverages stepped up by 10.8%.

A Foolish conclusion

Thai Beverage’s efforts to diversify its earnings away from the Spirits segment shows that the company is tying to implement its “total beverage” vision articulated in its 2015 annual report.

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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 contributor Ong Kai Kiat does not own shares in any companies mentioned.