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Thai Beverage Public Company Limited’s Year in Review: Did it Lose its Spirit?   

Thai Beverage Public Company Limited (SGX: Y92) released its annual report for its fiscal year 2016 (FY2016) last month.

For Thai Beverage, FY2016 contained just nine months – it stretched from 1 January 2016 to 30 September 2016. The usage of a nine-month fiscal ‘year’ was to facilitate a change in the company’s fiscal year-end from 31 December to 30 September.

In FY2016, Thai Beverage reported THB 139.1 billion in sales, a figure that was about 15% higher than the comparable period a year ago. Thai Beverage derives its revenue from four business segments: Spirits, Beer, Non-alcoholic beverages, and Food.

Let’s look at the Spirits business segment and how it performed in FY2016.

A bird’s eye view

2017-02-20 Thai Beverage Spirits
Source: Thai Beverage’s earnings presentation

Thai Beverage’s Spirits revenue was mostly unchanged in FY2016. The segment recorded THB 76.6 billion in sales and accounted for 55% of Thai Beverage’s FY2016 revenue. It also recorded a net profit of THB 14.5 billion, which is 76% of Thai Beverage’s total net profit from continuing sales.

Clearly, the Spirits segment is an important contributor to Thai Beverage’s business.

Spirited away

The Spirits segment saw opportunities as well as faced challenges in FY2016. Thai Beverage’s latest annual report outlined the challenges the Spirits segment experienced:

“Spirits business in 2016 was affected by the economic situation, as shown by some consumers shifting to lower-priced products.”

The shift in consumer behaviour is visible when we observe that the total sales volume for Thai Beverage’s Spirits business had increased by 2.3% to 416.8 million liters in FY2016, but both its revenue and profit were unchanged. Thai Beverage noted:

“Comparing year on year, purchasing power still did not improve and some consumers switched to white spirits which had lower price point and generated less profits per bottle, comparing to brown spirits. As a result, spirits business reported no growth in net profit, despite higher sales volume.”

Despite the challenges, Thai Beverage made an effort to market its premium Mekhong brown spirit brand in FY2016. In its annual report, the company noted:

“With our route-to-market and distribution strength through HORECA, we were able to make our “Mekhong” brown spirits available in more than 1,000 luxury hotels and restaurants in 2016. Our premium spirits from Scotland were also made available in more than 200 outlets nationwide.”

HORECA is a new distribution channel which enables Thai Beverage to distribute its products to luxury hotels and restaurants. No details were provided on how successful the effort was, but as whole, the Spirits segment’s revenue did not change in FY2016, as mentioned earlier.

Investors will have to see what the new fiscal year brings for the Spirits business in Thai Beverage.

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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 Chin Hui Leong doesn’t own shares in any companies mentioned.