1H 2022 Half-Year Financial Results Briefing

Good evening everyone and thank you for joining the Thai Bear Rich First Half 2022 results call. All participants have been placed in a listen only mode. Later, we will conduct a question and answer session and instructions will be given at that time. I will now hand over the call to the presenters Ms. Nam Foon Aung Soo-Thon Runge, Thai Bear's Head of Investor Relations and the members of Thai Bear's senior management team. Please go ahead. Good evening, ladies and gentlemen. Welcome to Taiberish, the first half of 2022, ended the 31st of March 2022 Financial Results Conference call. I am Nam Foon, Aung Soo-Than Rang-See, Head of Investor Relations. For the conference call tonight, I will start with a summary of

the first half of 2022 results. Then we will open the line for Q&A session with our management team. For the summary of the first half financial results, total sales revenue of the company for the six months ended the 31st of March 2022 was 142,942 million baht, an increase of 8.9% when compared to last year. This was due to an increase in sales revenue of all business segments. The profit was 18,365 million baht, increased 14.2% compared to last year. This was due to an increase in net profit of beer, non-alcoholic beverage business, food business and associated companies, which is partly offset by a slight decrease in net

profit of spritz business. High Beth's board of directors agreed to propose an interim dividend payment of 3,768 million or 0.15 baht per share, the same as last year. The company remains committed with our full-year dividend policy of not less than 50% of net profit after deducting off or specified reserves, subject to our investment plans and as the board of directors deemed appropriate. In the first half of 2022, the company's spritz besets generated sales revenue of 65,186 million at 2.1% increase compared to last year. Sales volume increased 6.4% year-on-year. The SPRIF business reported net profit of 12,816 million baht, a slight decrease of 0.4% year-on-year

due to an increase in cost of goods sold. The company's BA business recorded sales revenue amounting to 61,939 million baht in the first half, a 14.7% increase compared to the previous year. Thanks to the measures to contain COVID-19 have been relaxed, total sales volume increased 5.5% year-on-year when including sub-vehicle sales, and increased 2.8% year-on-year when excluding sub-vehicle sales. The company's net profit for the bear business shows a satisfactory increase by 62.2% year-on-year to 1,377 million bucks. The company's non-alcoholic virus business generated sales revenue of 8,204 million baht, and 8.1% increase year-on-year. Total sales volume rose 7.5% year-on-year, mainly due to the increase in sales volume

for drinking water, ready-to-drink tea, partially upset by a decrease in carbonated soft drink sales volume. Net profit for the non-alcoholic breast business rose 31.5% to $438 million. The company's food business recorded sales revenue of $7,688 million in the first half, a 30.6% increase year-on-year. Following the resumption of diet and services, net profit increased significantly by $261.5% year-on-year to 272 million baht. This was mainly due to an increase in sales as well as managing distribution costs and administrative expenses, presently. The company's international business recorded sales revenue of 36,867 million baht in the first half of 2022, a 24% increase year-on-year. The increase was mainly due to a 29% increase

in beer sales as a result of the relaxation of COVID-19 restriction in Vietnam and the growth from chancel d'art sales in China. The International Spirits Business reported sales revenue growth of 3% driven by Myanmar market. That is the summary of the first half 2022 results. Before we start the Q&A section, I would like to note that for regulatory reasons management will not answer any questions with respect to the proposed spin-off of vehicle limited. Instead, please refer to the type F announcement on the 5th of May 2022. The announcement included certain information about the vehicle group that allowed type F shareholders to better understand the scope of the proposed spin-off and the listing of

vehicle. Certain information about the vehicle group is also included in today's presentation materials for purposes of updating the information previously provided about the vehicle. However, in this conference call, management will only speak about the type F beer segment, which is different from the vehicle group. Management may not respond to questions relating to the vehicle group for regulatory reasons. We will now open the call to any questions on our results. Operator please help open the line for Q&A. We will now begin the question and answer session. Participants with questions to post, please press 01 on your telephone keypad and you will be placed in the queue.

To cancel the queue, please press 02. We have got the first question from Silviana Arapin, HSDC. Please go ahead. Sure. Thank you very much, management, for the opportunity and thank you as well for the presentation. My question is with regards to the spirit's business. It seems that as the economy reopens in second queue, this time it appears that sales growth momentum is slowing down. Can management talks about what to expect in terms of outlook going ahead, in terms of spirit business, should we expect further slowdown in the spirits business? That's my first question. My second question is with regards to, you know, the performance of brown versus white spirits

can management make some comments around that? Thank you. In terms of the six months, six months of spirit volumes reported is actually one of the highest since we listed. So actually the momentum is doing, our sale are doing well. And in term of profit that we actually have a flat profit compared to the quarter, same period before, because we have experiencing some cause push raw material that basically pressure us to have some price adjustment that happened in this first half of the year. We have completed the price adjustment in the widespread space that should allow us to maintain our profitability. In the due to price adjustment in the first six months, meaning the first half, there

there's some additional loading and increasing in sale in widespread. So the products mix have shifted to be more widespread as a percentage than widespread because of the price increase in widespread that causing the trade to stock up. And therefore reducing the weighted, more like a weighted cost profit margins of the grid in the first half. The first half have experienced some lack of lack of gene browse for itself. I think this is happening throughout the industry, including the industry as a whole and browse for experiencing some decline because of the in the first half, we, the country experienced a lot of COVID infections, so social distance have been restricted. We are expecting, however,

we are expecting the second half, the widespread consumption will pick up because of the opening of the trades, opening and returning of the tourists. And as we've seen in the news the the past two days, the operators, meaning the pop and bars associations of the operators requesting the government to allow them to open, they've been closed for I think more than a year, close to a year. So I think that with that opening, they will allow social gatherings and allow for a better browse bridge sale in the second half. Got it. Thank you very much. Thank you. Our next question is from TTTA no Faket from Katnakim Fakra Financial Group. Please go ahead. Hi, can you hear me?

Hello. Yes, we can hear you. Can you hear me? Yes, hi. I have two questions. Number one, if you look at the sales in the past six months. Beer seems to be doing better than spirits for both in Thailand and in Vietnam. Spirit is not doing that badly, but then it's still negative by a low central margin. But usually between beer and spirit, it's more resilient than beer. Why has beer performed better than street in the past six months? That's the first question. And then second question, can you update us on the raw material situation on mole, molasses? And then how the price inflation for the freight rate,

for the gas, for the oil, affect your cross-mizing going forward? Thank you. Please go ahead to answer. Thank you. Really, Ted, when beer better than spirit, then you ask question, when spirit better than beer, then you ask question again. But anyway, the thing is because beer, we have the Vietnam market also, okay, Vietnam market, markets open before Thailand. And then the growth in Vietnam is quite significant. This second quarter, for spirit, majority is in Thailand. And the opening of the market is lower. As you can see that the hub and bars and things do not open up to today. And they probably will consider opening very soon because it's a lot pressure from the operator

to the government. So that's hope. Hope next quarter we grow at the same percentage. Thank you. Thank you. Thank you. I'll answer it about the molasses cost. Actually because this is related only to Thailand because our raw material which is molasses was sprayed and molasses are linked to sugar cane, sugar refinery. So those are the crops and those are industry data that you can see that this crop, I think The sugar industry, the crop for this year, is much better than last year. Last year was one of the probably worst year of sugar crops in Thailand. So this year, the sugar crop have increased by almost like more than 40%, almost 40% than the year before.

So which mean the molasses that we purchase from this crop price I'm lower than the year before. But the raw material cost in terms of that coming through into a cost of goods that you see in the first half year is actually relating to the molasses from last crop, not this crop. So this crop that we bought in actually is still in the working process and finished good ready to be sold. So we are expecting the, because of this is the fact that there are small molasses in the industry, so our molasses costs are lower currently than the year before. But hopefully that's answered the molasses expectation.

And because of the industry also, the sugar industry also guaranteed a price for the farmer in the next three years. So the sugar industry are expecting that there will be more sugarcane crop in a year, for the next three years as well. So we are expecting that next year, that's what the industry are expecting, that there will be more molasses, and therefore price will come under pressure on the lower side. Wun-ti-ti-tayep. Right, right. Mr. Lee speaking, you asked about the mold. I can inform you briefly about that. We are lucky in the way that we have to carry over, you know, talk from the last years.

So I think we are lucky. And I want to give you another information is that we never rely on the Bali. Another way we call it mouth from Ukraine and Russia. We don't have the sources over there. Okay, thank you. Right. Right. Just thank you very much. Just one follow up question. I try to separate the BSLs in volume term in the first half of the year between Vietnam and Thailand. I just like to confirm that my calculation is correct. According to my calculation BSLs volume increase both market in Thailand by about 3% year in year and in Vietnam it's about 7% year in year.

You can confirm that my calculation is accurate. Yes, it increases for both markets and when we report, we report the sales volume, includes the vehicle and excludes the vehicle, you can work on the increased amount from those number that we report. Right, okay. Thank you very much. That's all the questions I have. Thank you. Thank you. Our next question is from Nicholas K. Credit Suits. Please go ahead. I just had a couple of questions. I just want to follow up on the raw materials. For the malt stocks, I just wanted to ask how long that would last. In terms of the molasses, did you mention that because of the higher volume or the higher crop this year,

that the price is lower than it was in even 2021 or even 2020. And then just want to understand in terms of the price guarantee. So if the price comes down, basically you as a type of get to buy the cheaper price and then the government pays the farmers the difference between the net price and the guaranteed price. Hi, Nikolas, in terms of the forward looking for the more price, sorry that we cannot give you the guidance on those. For Molasses, Kunbrapakan, we'll help you to explain to you how. Hi, Nikolas. I think from Molasses, let me just clarify what we've referring to the government.

Sorry, the sugar refinery industry guarantee the price purchase for raw sugar. I'm like raw sugarcane from the farmer for the next few years, which means it gives the farmer a comfort level that they will have a good fixed price going out. That's why the farmer will be willing to keep growing or keeping the sugarcane. Because the sugarcane in Thailand is a crop that switches between sugarcane and topioca and all those. So which means if I'm and corn there are three crops so you can switch between corn, sugar and tapioca but normally it takes about three years for the farmer to recover those. So whatever that the government if they sugar

refinery sugar industry giving some guarantee price so there will be more farmer more number of farmers are convinced to stay in in the sugar by growing sugar instead of switching to corn and tapioca. So that's what I meant. So therefore, giving that outlook, we are expecting there will be more sugar in the next crop. The crop of sugar in Thailand starts in December and ends around April of this year, of each year. So that's why we are in May. That's why we can say that as of end of April, just last month, that sugar, this crop has provided more more sugar and more sugar cane, more sugar and more molasses than the year before.

Because the year before was a really low year, okay? And for what I said about the price guarantee for the farmer, which means there will be more sugar and therefore by definition molasses is sugar byproduct, there will be more molasses as well. And therefore price of molasses should be kept low or lower than this year. Thank you. On the mock, I wasn't asking for the forecast. I was just asking if I heard, you said you have, you still have some stocks. So I just want to understand how much, how long do those stocks last? Hi, Niklas. We also cannot tell you how long that we buy forward because that one, you will know how

long we have it forward. is something that we cannot provide, sorry. Okay, that's fine, thank you. Thank you. Thank you. The question and answer session is still open. If you would like to ask a question, please press 0-1 on your telephone keypad now. The Q&A session is still open. If you would like to ask a question, please press 0-1 on your telephone keypad now. We have got one from Lisa and Tanya You're wrong, you OBK here, and please go ahead. Hi, thanks for coming from the city. I just have one question. So, seeing that there is some pressure in the cause and due to inflation and whatsoever,

I just want to ask whether, I think there'd be any future price adjustments for like, say, for beer or godspeed, because I understand that white spirit has already been a price adjustment for the white spirit. So basically I'm just trying to ask if any price adjustments will be in the ground space. Hi, Leifan. What you asked, question is about future price increase. Is it right? Is it for future pricing? More or less. If it for future price increase, this is something we normally don't disclose. Oh, OK. OK. Sure, thank you. Can I just get better here from Vietnam, just to reiterate that we already increased price

last year and April this, uh, uh, December last year. So I think we are going to increase in December this year, April this year. So we made the price adjustment already. Okay. Thank you. Thank you. Our next question is Hong Han Lo from CLSA. Please go ahead. Hi, um, thank you so much for giving me the chance to ask questions. Um, I would like to know a little bit more in terms of A&P spending, given that the economy in Thailand has already begun to reopen, you are also expecting tourists to return back to Thailand, can we try to understand in terms of A&P spend, how do you see this trend as a percentage of sales tracking

over the next few more quarters or next one or two years? Some clarity and this would be appreciated, Thank you. It's difficult to answer. Of course, if the economy is picked up, the situation alone, then we would consider sort of increasing the A&P just to make sure that we maintain our brand equities and all that. But it's difficult to answer because, for example, right now Thailand, the pubs and bars are not open and then the government still have some regulations. So we don't know when will they totally open, but if the economy is going back and that situation is better, of course, as a brand company, we need to put money behind the brand

when that's my general answer for any market. Sure. Thank you. Can I go a lot with regards to pricing? I understand that there was an earlier question with Thailand and whether it would be continuing pricing trees. We think we could shift gears a little bit and look at some of your competitors. Can we try to understand in tablet, being raising prices so far this year? Because I understand that you did raise price one sometime in March. My question is specifically for beer, specifically for beer side here, which I think you raised in March. Just trying to know whether any of your peers price as well. Thank you. Hello, hi, this is Lester here. I think in...

Hi, hello, yes. Yeah, with regard to price increases, we always try to monitor the market situation as well as our internal situation with regard to pricing, with our material pricing. So this time round, yes, we did increase our prices in March, and was some competitive movements around the same period as well. Okay, got it. Seems to be something the content of the industry, the industry together as well. Thank you. The Q&A session is still open. If you would like to ask a question, please press 0-1 on your telephone keypad now. We have got Philip Chu, sorry, Paul Chu from Philip Securities. Please go ahead sir. Okay thanks so much. Just two questions on the

spirit business. I just wanted to confirm the second quarter volumes was up 4% revenue was I think flattish. So can I just confirm that this is just because of the product mix. This higher contribution of white spirit. This is my first question. The second question again on spirit. Could you give us the wish mark? Did you increase the price for white spirit? Thanks so much. It is a product mix in the second quarter. The small, definitely small widespread sale, actually very high double digits and we do have a lower browse spread sale compared to the same quarter before. So that's a product mix. That's why I contribute to a slightly lower profit while the sale is higher.

The price increase for widespread, we actually increased half the volumes, well the large bottle was increased back in November and the small bottle was increased in February. So we split it off in two quarters. Thank you. We have got a follow-up question from Nicholas De Credit. Please go ahead. Thanks for taking my question. question just a quick one in terms of the price increase that you've done this year already can I just check how much it was for beer and for spirits hi hi Nicholas this Lester here for beer we we raised prices differently across the portfolio but generally they were in the low single digits Nicholas and for

for widespread we the price increase is roughly around four to six percent so that depends on the unit size the SKU will increase but only on the Y but we did not increase browse rate the last time we increased browse rate browse rate price was at the beginning of the covid which is is considered to be the first and the second quarter of 2020 fiscal year, about two years ago. Okay, got it. That's 4% to 6% for white spirits, right? 4% to 6%. Okay, got it. Thank you. Thank you. Our Q&A session is so open. Please press 01 on your telephone keypad if you have questions to pose.

As I know for the questions, I will hand over to Ms. Nam Foon, also to Nrumqi. Please go ahead, ma'am. Thank you for joining the Thai Beverage Conference call tonight. If you have more questions, please feel free to contact the IR department at IRatThaiBev.com. Thank you and have a good night.