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Thai Beverage Public Company Limited’s Third Quarter Earnings Tumble 61%

Yesterday, Thai Beverage Public Company Limited (SGX: Y92) announced its financial results for the third quarter of the fiscal year ending 30 September 2018 (FY2018).

As a quick introduction, Thai Beverage is a leading beverage company (of both the alcoholic and non-alcoholic varieties) in Southeast Asia and the largest of its kind in Thailand. The company also has a 28.5% stake in another Singapore-listed company, Fraser and Neave Limited (SGX: F99), which is a beverage producer and distributor with a long history. Thai Beverage is also one of the major shareholders of Frasers Property Ltd (SGX: TQ5) with a 28.4% stake.

Financial highlights

For the third quarter of FY2018, Thai Beverage’s revenue grew 34% year-on-year to THB 60.7 billion. The higher revenue was on the back of improved sales from the beer and food businesses, which were partially offset by lower sales from the spirits and non-alcoholic beverages businesses.

Revenue from the beer segment climbed 105.2% to THB 28.3 billion, primarily due to an increase in sales volume from Sabeco. Thai Beverage is a significant shareholder in Sabeco, a Vietnam-based beer brewer, which was acquired at the end of 2017. Sales volume, excluding Sabeco’s product lineup, would have been lower by 8.9% though.

Revenue from the food segment, which surged 109.7%, included sales from the Spice of Asia and the QSR of Asia restaurants, which were acquired in end-2017. Spice of Asia runs restaurants serving hotpot and Thai food, while QSR operates more than 200 KFC stores in Thailand.

Despite the impressive revenue growth, Thai Beverage’s profit attributable to shareholders tumbled by 61% to THB 6.0 billion. This was mainly due to lower earnings from the spirits and beer businesses, higher net loss from the non-alcoholic beverages business, and lower contributions from Fraser and Neave and Frasers Property. Higher profit from the food business could not mitigate the impact from the factors mentioned earlier.

Even after excluding non-recurring expenses and fair value gains on financial assets, Thai Beverage’s profit attributable to shareholders would still have fallen by 10.3%.

For the first nine months of FY2018, Thai Beverage’s revenue improved by 22.1% to THB 173.9 billion while profit attributable to shareholders fell 48.3% to THB 15.2 billion. Operating cash flow declined from THB 20 billion a year ago to THB 16.9 billion.

Thai Beverage’s balance sheet weakened in the reporting quarter. As of 30 June 2018, the company had THB 235.3 billion in total debt, and THB 13.0 billion in cash and cash equivalents, translating to a net debt position of THB 222.2 billion. In contrast, at the end of September 2017, the company had THB 30.7 billion in net debt while in March 2018, it had a net debt position of THB 214.1 billion.

The Foolish takeaway

It was not a great quarter for Thai Beverage with lower earnings, though the recent acquisitions have started contributing to the group. Furthermore, the company’s balance sheet remains weak, with lower cash flow from operations. It should take a few more quarters or years for the cash flow from operations to start flowing in to help reduce the company’s debt load. It would be interesting to watch how Thai Beverage performs in the next few quarters.

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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 Sudhan P doesn’t own shares in any companies mentioned.