FY 2021 Full-Year Financial Results Briefing

Good evening everyone and thank you for joining the Thai Beverage FY 2021 results call. All participants have been placed in a listen-only mode. Later, we will conduct a question and answer session. The instructions will be given at the time. I will now hand over the call to the presenter, Ms. Nam-Fung An Su Tong-Long-Sih, Thai Bref Head of Investor Relations and the members of Thai Bref Senior Management Team. Thank you. Good evening, ladies and gentlemen. Welcome to Thai Barrage 2021, ended the 30th of September 2021 Financial Results Conference call. I am Nam Foon, Ang Soo-Tha Rong-se, Head of Investor Relations. For the conference call tonight, I will start with a summary of the 2021 results,

then we will open the line for Q&A with our management team here. For the summary of our results, total sales revenue of the company for the year ended the 30th of September 2021 was 240,543 million baht, a decline of 5.1% when compared to last year. This was due to the impact from the COVID-19 situation, which was more severe than last year. Net profit was $27,339 million, an increase of 4.9% year-on-year. This was due to positive change impact from last year's non-recurring costs and deferred tax utilisation related to bear business restructuring of $2,660 million. The Board of Directors has proposed to issue a dividend of 12,559 million baht or 0.5 baht per share, which is higher than 0.46 baht per

share of last year. The payout ratio for the fiscal year 2021 dividend is 51% payout ratio. Please note that the interim dividend was paid in June 2021 at 0.15 baht per share and the final dividend will be 0.35 baht per share. For the highlights of this year, the company's spirit business remained resilient in 2021. Despite the closures of entertainment venues and restaurants, experts are mostly consumed via off-trade channels. The business generated sales revenue amounting to 150,052 mbaht, or 1.9% decrease year on year, taking into account a 1.8% decline in total sales volume. The Spirit Business delivers stable net profit of $22,138 million, along with an improvement

in the net profit margin. The company's beer business recorded sales revenue abounding to $99,157 million in 2021, a 7.2% decrease compared to the previous year, in view of lower bear sales volume due to the strict COVID-19 control measures in Thailand and also in Vietnam. South-South sales volume decreased 11.1% year on year when including Sub-Eco sales, and decreased 4.4% year on year when excluding the Sub-Eco sales. The net profit of the company's bear business declined 11.4% year-on-year to 3,119 million baht. However, their business in Thailand reported an increase in net profit from cost-saving initiatives. The company's non-alcoholic beverages business generated sales revenue, amounting to 15,205

million in 2021, a decrease of 6.6% year-on-year due to a 7.6% decline in total sales volume. The net profit from normal operation rose 51% to $548 million year-on-year as a result of cautious cost management by reducing advertising and promotion expenses as well as controlling administrative expenses. excluding the margin of insurance came on property damage from five incidents of Osheba Ranch factory recorded in the previous year. The company's food business recorded sales revenue of 11,280 million baht in 2021, as 14.4% decrease year-on-year, mainly due to impact from the government-imposed containment measures to contain the virus spreads, including restaurant cross-shells in the shopping mall and the prohibition of the diet in services.

The business undertook active mitigation measures such as enhancing home delivery and take-away options by managing costs prudently. Nevertheless, the decrease in sales revenue led to a net loss of $488 million for the food business. The company's international business recorded sales revenue of 57,394 million in 2021, and 8% decrease year on year. The decrease was mainly due to an 11% decline in BSLs. Following the lockdown and strict social distancing, measures in Vietnam. This was partially mitigated by a 5% increase in revenue generated by the international spirit sales due to the growth in contribution from Scott Spitzky and also Chinese Spritz. Now we will open for the call to any questions on our results.

Operator, please help open the line for Q&A. Thank you. We will now begin the question and answer session. Participant with the question to pose, please press 01 on the telephone keypad. And we will place in the queue. To cancel the queue, please press 02. Once again, 01 on your telephone keypad. First, we have a TT-TEP, please go ahead. Hello? Hi, TT-TEP, go ahead. I have a few questions, maybe I go one by one, if that's okay with you. Number one, can you update us on the situation in Myanmar? It doesn't look good, both in terms of the violence, the riot, and then also the COVID.

How was their sales in Myanmar during the past six months? And your view on the future sales growth would be appreciated. You wanna go one by one, right? I will ask Khun Prabhak to respond to you on the first question.

Sorry, God. Actually on Myanmar, the questions relating to COVID COVID, in the past few months, we start to see that Myanmar have returned to normal in term of COVID cases have dropped and the vaccination rollout actually done quite well. In term of our staff, we also have full vaccination rates and that's even provided by the government. So that's something that's not of concern. The concerning topic that everyone's operating in Myanmar today would be probably the economic environment, the banking system and how cash or banking system operate due to instability of the government. I think that's just the risk of being in Myanmar for every business.

For our business, we remain profitable and in fact we close the year in local term. I'll touch on the foreign currency in a bit, but in local currency term, we close the year actually for the grand royal business net profit after tax higher than last year. So we remain very confident, we have no 18 receivable issue. In fact, our 18 receivable report, it's actually healthier than before all these financial, all these economic environments or instable government, because I think we, since the beginning of the year, we decided we put even more control on aging receivable because that to prevent the risk of not be able

to collect our revenue on sale. So that's check and the foreign currency itself itself has been fluctuated and start to get stabilized since October. The currency was running around 1,300, 1,400 yards per US dollars and then to about May, June, July it went all the way exceeding 2,000 yards. The government have put in quite a number of exchange control and asking the exporter to convert their dollar back into cash in local currency. So that start to stabilize the foreign currency. And the latest is that the foreign currency start to stabilize a lot of 1,000, 7, 1,008. And that's about just about where we budgeted for the year.

We think that anything below 2,000, it's still a bearable level of effects. segment is not possible to expect the currency to remain in that level before. So I think all in all we remain confident there is an import material risk that coming with the FX rates are being higher. So I think all the producer in Myanmar have started to incorporate a price increase into the segment, or the segment that can increase price would increase price. We also incorporate in our budget some price increase, so we are moving toward that direction to basically pay for the raw material price upward. I think in terms of the sale, it's not so much softened

a bit, but I think due to the economy, we believe that there are certain consumer preference over to our alcoholic beverage brand that doesn't relate to the current government. So with that shift in demand, all the producers that are privately owned, just like us, I mean in Myanmar, and a real private sector owned, have benefited from the spillover effect of that demand. So the answer on Grand Royal is that we are in good positions given all the risks involved in Myanmar, we remain very confident in our business. Thank you, Kunpapa. Koon-Ditay, your next question, please. Yeah, I have a follow-up question on Myanmar. Before the coup, Myanmar was an attractive market.

Because of GDP growth, it's pretty steep. And I believe the FDI, the foreign debt investment, was one of the drivers of the GDP growth. But after the coup, I highly doubt if they would still enjoy the same level of FDI and without GDP growth, would you change your outlook on Myanmar market? I'm talking about in the next three to five years. Do you think that it would still be a growing market like it was in the past three years? I think we have to take it from the different risk perspective with Thai company and Myanmar as a neighbour country, we see that as an integrated market into the future.

So it is the place that we will continue to invest at the right opportunities. In fact, when there is risk and there are certainly more opportunities, we actually think that there will be more opportunity in the next two years available for us to expand over the long term. So we do not think that we will write off this country in terms of growth. We think that give it another year, it will be more stable. And there will be foreign investment, but maybe from a different segment of the world, or maybe a different geographic part of the world that are going to invest in Myanmar. Right.

OK. OK. And then my second question is on the commodity price, especially the mold and then the gas price, because I believe you use gas in the glass bottle factory. How much would it be concerned about this price? And do you think it's going to affect your gas market going forward? Okay, this is what I... Since the cost push is relating to all beer, spirit and being food, so I will take these questions. We have to admit that this year the cost not only commodities but packaging, gasoline and all are one of the critical problems for all businesses here.

We put all this on the table and discussed it almost every meeting anyway. So I think we have to, we already sort of commit to the board our budget and then we found out that the cost push will probably have a chance to jeopardize our P&L, but we sit together and then work to mitigate that. of course on the commodity price. I think we, there are moat and then molasses. We're still happy about it because I cannot tell all my secret, you know, because we some of them we have forward buying and then we should probably last until many months ahead of time. So that one we do not have

any concern. The one that the other one is packaging. And packaging as you know that in our alcoholic beverage business the highest cost will be on the bottles and then we are talking about how to manage the percentage between returnable bottles and the new bottles. Of course we have aim to increase the returnable bottle percentage because that is controllable and manageable by a team and then with that it can help mitigating a loss, a cost push a lot. And of course the remaining gap we are considering our price increase I think is under drawing board for all the brands, sorry all the BU, which we believe that that can really close

the gap, which means that we probably have to increase the price on our key products here. So bottom line, yes, there will be problems on the cost push, but the management will focus on it, and then we can assure you that we will be able to manage it, okay, and then really sort of stick to the commitment that we have with the board and the chairholder in terms of our plan. Thank you, T.D. Teb. Hi, I have the follow-up questions on that. You know, if you pass on the higher cost to a consumer by raising the price, but then the demand in the market now is still

quite weak because of COVID mainly, do you think the higher price is going to affect the volume? Of course, we also consider that seriously, but we probably have to manage to the level that is acceptable. We don't want to increase the price until jeopardize the volume and market share, definitely. So the level of price increase will be different and we closely monitor the consumer acceptance. It could be down to the details of buy SKU. Okay, so we are sure that we can move up the price. Of course, we're not planning to lose any volumes from these price increase programs. It's going to be tough, but we cannot avoid it because cause push is not only in Thailand,

but it's in all over the world. So I think everybody has to face that and how we manage that. you probably can hear from the news even the big beer, international beer, they have put in the headline that no more cheap beer, which means that everyone has the same problems and then it will move up. So bottom line is we will move up very carefully and then we will consider timing and also now to the SKU, which means not all the brands will probably not increase like 5% for all SKU know. We have to work by the SKU, okay? Thank you. Right, thank you, Chuck.

And then my last question. Thai government gradually, they last locked out, I think starting from September and starting from November, they allow the restaurant to sell alcohol. It doesn't help itself. And then I think the activity of Thai people start to go back to me normal gradually. Should I, is it fair to expect that in the first quarter of the three year 2022, the sales of your product in Thailand should improve Q and Q? Is that a fast statement in your view? Yeah, it's a bit forward looking, but anyway, it's true that restaurants open and allowed to drink, But please remember that the bars and everything

will not be open until 16 of January. That's still a problem with us. The opening of the bar and restaurant actually benefit our food sector the most because as you can see in our department store and everything, they're allowed to dine in. Definitely the food will benefit from that. But for the alcohol, I think like beer and brow spirit, We probably have to wait until January 16 to go full blown. But as you know, our spirit business mainly on white spirit, big chunk on white spirit, which is home consumption. That's why our spirit business we live to be very resilient. Right, okay. Thank you. Okay, thank you very much.

Thank you. Thank you. Thank you. Thank you. Thank you. Next we have for the URB K-HEN, I had three questions. I think the first two were already asked by the previous analyst. So maybe I just go on to my last question. So with regards to the BLIPO, so I understand there's been this thing, you know, some post-call or actually night-breaking call-off, but could you share some updates on the BLIPO? I'll ask our CFO to address that. Koon-see Lee-chi will respond to your questions. Lee-chi, Koon-see, Bo. You know that because we make announcement on 16 December this year for the D4 VIPO due to the COVID.

But now the situation, even in Thailand and Vietnam, recover. So now we're gathering all the hours, all the FA, LA and auditors back for the office and then to restart again. Yeah. So whenever we have any significant that need the announcement, you announce to the stock market, but we definitely have to do this to be success on this one. By the timing, you can see on the announcement to the stock market. I have just one more last question if you don't mind, so the simple question. So for the BRB, this is the net profit. Could you share what is the percentage between Thailand and Vietnam? Is that okay?

Thailand, in terms of the split between Thailand and Vietnam, actually we do not disclose for type of group for the BRV include everything together in just the BR segment. We do not disclose separately. Sorry about that. Okay, I think I'll jump back to you and then move on. Okay, I'll be quick to ask that question. Thank you so much for answering that. Thank you. Thank you. Next question we have from Morgan Stanley. Leah, please go ahead. Thank you very much. So I had a couple of questions. The first question was just on the spirit business. If you look at the implied fourth quarter revenues, they are down about 19% and the

volumes also seem to be down 19% year on year in the fourth quarter, despite the bear business, at least on the domestic front, looking more stable. So could you comment on what happened on the spirit business in the fourth quarter? And that seems to have impacted margins also for the spirit business. So that's the first question. The second question is on Thai beer. Just wanted to get a sense on how the market share has been for the fiscal year 21 and how's the performance of those new launches that we had mentioned earlier this year on cold through an espresso. And just to follow up on the first question

that was asked on price hikes. I mean, has Boondorf taken any price hikes yet or has nobody actually moved in the Thai beer market? And just the last question would be on your comment if there's any noise or exercise back changes that we should be aware of, any regulatory changes in Thailand or in Vietnam. Thank you. I think Bob, can you address the first question? Couldn't pop back on. Second question should be less. Third question we have to check. Divya. So Thailand, sorry, that's spirit business. So, in majority of it, over 90% are from Thailand. And in the quarter full, the slowdown by COVID impact in terms of consumption really hit hard

because I think since the government has the lockdown in April, May, it starts to show up in terms of consumption and the government provides less support in terms of income support to the people who are out of the jobs as well. So in Q4 that started to show, and I think it's just a very slow quarter for us. So that's what we see basically. In terms of managing it, we have basically look at it from the overall full year basis, and I think we'll look at the number on a full year basis, we're reporting a good net profits and EPR for the year, comparable with the year before.

So I think what we just want to see from that perspective, I think from this Q1 currently, we have put in place some gradual price increase. And so in the October, November, we start to see some factor loading that coming back in the Q1 number. And looking forward to the opening of the segment, I think on the ground we are getting information that, even though the government are saying that people cannot allow to be drinking on their pub and bars and on premises in many locations, but it seemed that people generally start to disobey and they start to drink because I think people have, it's getting to New Year's

and people probably have enough of it. It's not something that we encouraging but it just we see that on the ground and if that's happening, the consumption of our quality beverage, about the portfolio that deliver by our company will probably get some benefit. Right up in the New Year's, if Pop and Bar is open in January, we will start to see a lot more pickup in terms of browse retail as well. Hi, Divya, this is Lester here. Let me go to your three questions one by one. The first question you asked was about market share for last year. I'm very happy to report that we picked up share.

This is in spite of a lot of cost savings in our AMP, as what Koonam Fong mentioned earlier. So the share pickup was mainly due to better use of resources and better execution on the ground. So that part we picked up close to two percentage points in the market over the year. Your second question was about Espresso. This one, not as good news as I would like to report. Basically Espresso is mainly sold in the modern trade channel in the convenience stores. And so the success of the Espresso variant really is dependent on how well convenience stores do. And you see that last year in the market, the convenience segment took a big hit.

In fact, there were a lot of closures of stores. So we kept activity to a minimum for Espresso. But what I would like to report is, you know, Espresso was also done, well, it was done for two reasons. One is obviously to excite the market with new exciting products. And the second is when we launch new products, we would like them to be higher margin. So while Espresso being a higher margin item did not do so well due to the market, I'm happy to report that Cold Brew, our next higher margin item, actually did well. and our share continues to climb. I think we are approaching the other brand in the market

that they sold in a green bottle also. So our share is coming up against them and we hope to surpass them in the near future. And your third question was about Boon Roy, have they had any price increases? And the moment no, we have not observed any price increases on their end. Obviously, we do keep a very close eye. I think both of us keep close eyes on each other. And again, we will move accordingly. But at the moment on their end, no price increases yet. Thank you. Thank you, Lester. Divya, I didn't get your third question, the third big question. Would you repeat it again slowly?

Sure, sure, sure, Kuneerja. The third question was just any information on, you know, any talk about excise tax changes in Thailand or in Vietnam or any other regulatory changes related to the sector that we should be aware of? I will respond on the Thai side. I think the government has already increased the secret tax and then as normally the spirit and beer were coming but we didn't hear anything yet. As I always mention every time we have these kind of sessions for these questions is tax increase is unavoidable. We cannot influence the government, but our track record, we always manage it well.

And every time we have a tax increase, it's our opportunity to move up the price to cover the tax plus slightly more higher margin. Okay? Because in normal day, normal situation, if you move the price, the consumer complains, With the tax increase, I think we can do a bit of that and then don't get any complaints from the consumer. So bottom line, we don't know. Okay, the government has already increased the secret tax. In the past, it's only a few months after then they announced the tax increase for beer or spirit. They haven't done that this time, so quiet. but we'll follow up closely. Our eyes and ears closely to these matters.

For Vietnam, I don't have any idea. Bennett, are you there? Can you give a... Yes. Okay, can you respond that please? Okay, I will do that. Thanks, Mu Jai. Okay, for Vietnamese, there's always rumor that excise tax will increase and the government wants to increase their tax collection. But for us, we have been working as an industry, as an industry within lobbying or talking to the government to ask to tell them that we shouldn't increase excise tax and we are very hopeful that there will be no tax increase, we're very, very hopeful. Having said that, even if there's a tax increase, I think we've demonstrated that in the past,

we always are able to pass on to consumers and we never have a problem passing on to consumers. And just for a fact, I mean, we, in fact, mean we just increase to just announce the increase of price for in December. So sometimes in November our price will increase so that would even mitigate even if there's an exercise tax increase coming but I just want to confirm again that we are very hopeful that there will be no tax increase in the coming year. Thank you. Thank you Bennett. Thank you Deepa for your questions. Can I just have one clarification from Khunbab on the SPIRS business because I'm still starting to

understand that why the fourth quarter was as weak as it was but could you comment on this October November you mentioned that there's some price hike that's been taken like when exactly was this taken and and how the volumes have the volumes improved in the fourth quarter in the first quarter or are they still pretty null because typically I mean SPIRS has been resilient it doesn't impacted so much from COVID related restrictions. So just wondering what's the latest update on spirit volume and where exactly was this price hike taken and how much. Thank you. Okay, let's separate the two and go one price increase. Another one is the momentum or

consumption in the market. The consumption in the market have start to suffer from the longer shut down by the government so the consumption start to have some problem in Q4. That's what we see. More so in the browse bridge front but not so much in the wide bridge side. But the relaxations of the social distance and lock down start to get better in October. So that one, take note. And like our company, Thai Beverage, we came back to the office in the middle of October. And we came back in full in the first week of November. We are now back in office. So it's not like work from home.

That doesn't work for us anymore. So that's just to show this is happening. We start to see traffic jam in Bangkok. That's a good thing and bad thing, but the pollution is a bad thing. But when you see traffic jam in Bangkok, that means you're back. That's happened in the past years since COVID arrived. So we start to see that. So we believe the economic activity has returned in October and November. We start to slowly come back. And the government now relaxing and have more tourist arrival and also have program for domestic traveling as well. So at the moment as we speak, we start to see a lot more moving back to normal.

Okay, so the only thing that's not back to normal is just the pub and bars that are not allowed to open right now and it will be after the new years. The rest of the thing we see it's back and people on the provincial side start to have more money and they will start to consume FMCG products, consumer products like us. Okay, that's from the economic front, consumer front in terms of Q1 that we see. In terms of price adjustment, we have been planning this. In fact, the planning of some adjustment price increase have been postponed due to COVID for wow. Before COVID we have price increase adjusted to our browse spread right before COVID arrived

in April last year, April 2020. Believe it or not it's less than two years ago. So that we have been kept delaying and we start to roll this out in October this year. A gradual price increase adjustment in our widespread portfolio. So that we believe that in the past 18 months, we do not see any drop in the demand of widespread and therefore justify the change in price that we incorporated in. We are confident that over the long term, looking out one year to a year, that is not going to impact our long term consumption. So that, how confident we are into a price increase and the price increase will help also pay for obviously a lot of

commodity price that being pushing up some of molasses from the last crop that are quite expensive for us has also factor in started factor in into our P&L in our cost of goods. The outlook for spirit in Thailand the outlook for raw material especially molasses in this crop much much lower it's about 20% lower than last crop so this crop we expecting a lot more sugar from sugarcane the harvesting will start in early October early December this year and we have we understand the forecast that there will be about 20% more in in harvesting sugar so therefore there will be 25% more supply and molasses and bring down the price.

So I think that factor in nicely with our cost of goods being under control. We also start to see, especially in the last quarter, higher level of use bottle in both Rongkang white spritz and Hongtong brown spritz. So I think we probably can push that up a bit further this year to help mitigate those cause increase from glass bottle that some other gentlemen have mentioned earlier. So that's hopefully answer. The Q4, one last bit is that last year in Q4, last year in Q4 we had trade promotions on our widespread in July, the first month of the Q4. So the overall volumes you see in Q4

last year is a bit elevated slightly due to trade promotions. We did not have it in this quarter because we think it's not necessary and we are monitoring the level of inventory. And I think toward the end of September, the level of inventory have moved down to a level that we think is suitable. Therefore, we roll out those gradual price increases. So long answer, but I think we not worry so much about it. It's under control. Thank you. Thank you, Lidja, for the questions. Thank you, thank you, thank you, Kunbob. Thank you. Next question we have from CLSA, Lao Hong Han, please go ahead. Hello everyone, very good evening to you. Thank you for taking time to speak to us this evening.

I have a few questions, so please bear with me. The first question I have is with regards to your promotional activities in FY 2022, how different do you think FY 2022 promotion activities will be compared to FY 21? And do you see the dollar that your AMP spending to be similar or it could increase according to revenue. The second question I have is with regard to the gains in market share in the bear business, do you see a possibility where your competitors will be more aggressive in AMP to regain market share and if so, will you also react by increasing your AMP spending? I do

recall your market share gain has been quite consistent over the last one to two years. The third question here is still on bear. Do you have any plans to hike the prices in bear and If so, when would it be? Last question here will be in regards to spirits. I do recall one of the reasons behind the resilient spirit performance was because I think some of the rural workers have returned back from city areas due to the COVID pandemic and that is one of the drivers behind the spirit consumption in rural part of Thailand. Now let's assume that Thailand is in the early phases of a long reopening over the next one to three years of full reopening

In this scenario, where most of the rural workers return back to their jobs in Bangkok City, how would you see this great performance to be in terms of the sales volume? That's all I have. Thank you so much. I will respond on the A&P questions. You asked whether this, going forward, we're going to spend more. I cannot give you the exact answer because it depends on the situations. Definitely if situation allows, we will have to come back and spend a bit, but we already learned a lot during the COVID period that which one, which kind of activities work for us, which kind don't work for us.

So it would be very, I think, I can say it's going to be very prudent in the future. But actually I hope that the situation is getting better so we can have the activities and really competing with the competitors. Of course, I think that we can think like this and the competitor will probably think the same. And this is a fact of life. Okay. So that, but I mean, to conclude, we don't know that we have to evaluate the situations. We wish we can do some activities and then get the consumer excitement and all that. And we believe that the competitors will not be still.

And then you cannot just be attending that, oh, they won't do anything at all. I think we are now competing head to head, okay? Because we're gaining a 2% market share. Of course, they want to stay still. I want to understand. Hi, I'm Lotus, let's stay here. I just add a little bit new. The AMP, which I just mentioned, as well as covered a little bit about how competitors will react to try and get the share back. As I mentioned, you know it is a fact of life working in a competitive market. Both sides will try and take share from each other. Hopefully, we will not use money as the tool to buy share back or to buy volumes back.

What we've been very fortunate with in during the COVID period was that because of the lack of activities, it gave us more time to actually take a step back and review all the activities, all the A&P activities that we do. We broken down into all 14 activities that we do, and we worked out an ROI for each category of activity and we now know which activities do give us the best returns and which ones actually make us lose money in running these activities and those are the ones that we will stop. So when you ask about will we spend more hard to say but what I can say is we will definitely

spend more prudently and that money that we spend will be more effectively used to get returns in the market. I think that is clear that every part that we spend will work harder for us to get volume and to get share from the competitor. Your last question was about price increase. This was answered the first round already. Konoheisha also mentioned that we will monitor cost increases and also monitor what the competitor is doing in the market and we will have to balance it all together because while we want to cover any increases in our cost of goods, we also want to have to balance that with

potential volume losses if the price increase is too high. So it is a balancing act. At the moment now, we are still in the review period. As and when prices go up too high, we will have to seriously consider a price increase when the time is correct. Thank you for the question. I was referring to the question of regard to the spirit's performance. If someone is able to interact with regards to how spirit performance can be, should Thailand return to full reopening? Given that I believe some of the resilience over the past one year will be given by rural workers who should return back. Yeah. Okay. You're right.

Last year, when COVID arrived, I think we see worker migrations, the two part foreign worker left, Myanmar, Cambodia, and Lyft went back. And I think also the Thai workers or staff from more tourist area, really more tourist related area, Bangkok, Shunburi, Patiapuk, get it all moving back to the Northeast. And that's what contributed to a higher level of proportion of sales in those areas, in a rural area where we also have strength in terms of distribution. As we expected, as the economy returned, the service sector will open up. We will start to see the better consumption in the tourist towns, which already start to see in Chonburi in the book

We start to see a lot more consumption. And so it is anticipated and we have, you know, have the team ready for the returns. In the past year, we see a lot of decline in the channel of modern trades, like in Tesco, Bixi, that macro, those channels. But we are anticipating those channels will have higher proportion of sales returning back. So that's something we also have the strength in term of distributions in that channel as well. So that's something we are anticipating and be ready for that. Sure. Thank you. Thanks for the clarity. I appreciate it. Thanks. Thank you. Next question is from Creditus Nicholas. Please go ahead.

Thanks for taking my question. There's three questions for me. I wanted to ask to clarify what you mentioned on the VIO IPO earlier, if I heard it correctly, that you've restarted the process now and brought back your financial and legal advisors, but timing is still uncertain. The second question is on the forward buying on the MOLT and molasses. How far forward if you could roughly tell us, have you brought forward for. And then the final question is just on SGMA. I guess over the past one to one and a half years during COVID, A&P spend has come down. But in terms of other kinds of SGMA,

are there permanent savings or cost cutting that you've done through this period that would keep SGMA low even as we reopen? City Chaikou, CFO. Normally you know that all the FALA, they don't want to spend too long. Normally the process seen last time we compete the operating circular, we compete the MAS approved. So now just come to update the FY 2021 or even the quarter and quarter performance on the FY 22. So I think it doesn't take long. Normally for FAOA, maximum they do, it's about only six months. If you are always six months, they have another job to do. Nicholas, on the forward buying,

I cannot tell you exactly, but I can hint we can sleep well for the next six months. I think that's referred to more, I think from molasses. Molasses in Thailand, there's no forward buying because it's an annual crop. So it is something that is also mostly domestic and no crop based on the sugar plantations crop harvesting. So we generally buy right before the harvesting period, which is about now. And therefore that's why we provide some indication that molasses price have come down substantially from last year because we are anticipating and the industry is anticipating more, about 20% more sugar harvesting for this annual period.

Your last question about how to save and whether we can save more SG&A. I think we find any opportunity to save but we will not save until it's heard our future operation performance. There are some, but I think the key one is the A&P. OK, Robert. Thank you. Thank you. Ms. Christian from UBS, Armada and Damono, please go ahead. Hi, good evening. Thank you so much for the opportunity. I have a few questions. So in terms of the Spirit sales in Myanmar, if I look at the financial disclosure in the sales in other, in under spirit, it's up 5% year on year, given the, you know, the weakness

in kia and the situation in Myanmar, obviously that's an impressive performance. Can you provide some color, how you managed to increase sales in both in bot terms and volume terms? Part of the sale outside Thailand or international markets are also covered by our Scotch whiskey business and in our whisky business we have done very well this year. I think it's also part of European economy and UK and Europe economy return back to normal. So that's helped with the demand. In Myanmar, as mentioned earlier, net profit in the local currency have increased for the year. So we adjusted for the exchange. We're looking at the numbers and flat interval

profitability. Cost cutting, higher level of control and higher efficiency in plant management. Our direct raw material price are within our control. So our volumes are down to about 5, 7% not much for the annual period so that's why we managed to have a higher profit for the year. So basically there's no secret to how to run the Myanmar business at this environment it's about making goods and collecting the money So it's because we sell in credit, so we are, as mentioned, we monitor our 18 receivables, very good, and tightening it even more so at the moment.

Thank you, Kumbap. So I'm assuming that would it be fair to say that the driver of the performance in Spirit Tales and Other, In other, it's more the UK and Europe from Scotch whisky rather than Myanmar. That's great. Secondly, on the beer margins, if I can sort of ask Lester, investor feedback on the beer idea, typically it's like investors are finding it hard to predict or forecast what is the sustainable margin of the Thai beer business. And it's encouraging to hear your initiatives on focusing on higher return from advertising and promotion spend. But can I ask if actually you have an explicit kind of margin target for the company on a

sustainable basis and also with respect to tourist spending on beer, pre-pandemic, what the contribution from tourist spending typically on beer sales in Thailand. Hi Purna, let's stay here. Just to talk about a specific target for beer margins, no particular target. What we do is we do benchmark other beer players around the world and we try to reach those kinds of margin levels. Obviously we are mainly a mainstream player where where you do see other international beer companies, they do have an extensive premium portfolio. So we know it will be difficult to match them, but we want to be as close as we can. So the target for us is to always be improving

our current margin levels to move them up. So a couple of ways, obviously one is to sell more premium margin products. At the same time, we also want to lower the cost make our spending more efficient. So that is the plan. So no particular target that we set in mind. And tourist spending, in terms of the tourist spending contribution historically, pre-cindemic on beer? We don't keep track of how much tourists spend on our beers. Although in the tourist areas, again, the bulk of our volumes come not from the tourist areas, but in the traditional trade and the rest of the country. And I cannot, you know, the volumes that we get from the tourists are not small, not large,

but again, they're not small either. So but they're not major enough to affect our total volumes. Again, like I said, the bulk of our volumes come from the traditional trade in the traditional areas of the country. But we will take as much as we can from the tourists when they do come back. Thank you. But you'd be able to see the fluctuations in terms of the sales from like areas like Phuket and Jangburi and all of that, right? Like between pandemic and pre-pandemic and without even trying to measure it, you'd be able to see roughly. Yeah, we do see that the southern area where most of

the tourist areas, the tourist islands are Phuket, Krabi, Pangna, all those areas, areas, the southern region is actually the smallest of all the regions in the country. So while we saw a drop in the southern region, what we tried to do was to pivot away from the tourist areas into the local areas, even in the south. But the south is the smallest contributing area in the entire country for us. Not particularly big. Thank you very much, Kumbh Laxter. And if I may, I'm going to end on Vietnam. We've received a bunch of, you know, we're tracking the situation there that essentially around 20 out of 63 provinces are now in level five in terms of higher threat.

You mentioned earlier in your quarterly briefing as well, the reopening by the government is quite cautious. What's the situation from underground right now in terms of on-premise reopening? how do you see it in terms of going back to normal in Vietnam? If I were to submit, I think the Vietnam is learning to live with COVID. So that's the first thing. They will not go back to the kind of the colonial kind of lockdown anymore. We believe that because the economy needs to be running. So that's the first thing. If you see, as in any country that's living with COVID, the cases come down and we start opening up again, the cases rise again. However, because of better

vaccination rates, the cases that require ICU or oxygen are less. So I think we are going to that stage where Singapore has been through and many other countries have been through. So the cases are now slightly to keep up. But I think they are very controlled in the sense that the government will not lock down the entire province anymore. They probably look at wards, look at districts to lock down if any right now. So we've seen a bit of lockdown here and there, but it's very limited to just districts, wards as well, not the entire province. So in a way, we see consumption coming back. In fact, we can see people coming out. We see people dining

out more and consuming alcohol already. So I believe that this is going to be a gradual recovery and I would say if you chart the straight line all the way to July when from now to July, I think you will both better and better and better. Biring any big surprises, better and better and second half of July we'll see more or less you know what we see in the 2018-19. And if you ask me then, probably hopefully at 2023, you'll be back to 2019 level. So in a way, it's coming back. I see people out, I see people drinking, and people are getting jobs, they're

able to afford to buy alcohol. So that's good news for us. Thank you, Kumbin. And last question to to the Nang Nook is around. We are seeing push from Kentucky Fried Chicken to move into plant-based meats. Recently, one of the companies recovered corn. For example, they said there's going to be a joint statement of collaboration between corn and KFC across Asia and Europe on plant-based meat in Thailand as well. Like, you know, Meat Zero obviously is around and so forth. Any plans for KFC to move into plant-based meat nuggets and secondly as well on hemp like the pizza company you know has a pizza campaign right now containing hemp and you move towards food containing hemp or

or drinks for that matter. Thank you. This is tip Nong Nhut. Actually we do have the plant-based chicken nuggets and also chicken pop okay and we do actually test in our two outlets, starting in August or September. It's doing pretty good. It's a local plant-based meet. We got a very good feedback with the PR communication and also people would like to try. So we are having that in our current plan and probably will roll out pretty soon. Thank you. Thank you. So the supply is local, is that right? Yeah, yeah, it's local. Local, okay, great. And with respect to hemp, any move toward cannabis containing beverages or food?

No, not yet on that plan. Okay, great. Thank you so much for answering my question. I really appreciate it. have a good evening and of course good luck for the fourth quarter of the calendar year. Thank you. Next question from the management. Deepinder Bhatia, please go ahead. Hi. So the question I have is really around the free cash flows being generated by the company currently and the dividend policy as I understand at 50% at the payout ratio. Could you give some medium-term vision into how the company is generating the cash flows that are being generated by the company currently and the dividend policy as I

understand at 50% at the payout ratio. Could you give some medium term vision into how the how you see both cash flows evolving, the policy that currently stands, debt reduction, investment, either organic or acquisition-based opportunities. If you could just please try and tie together some of these different strands, all of which are somewhat interconnected, that would be great. Thank you. So you can see that we are strongly committed that they will pay out their toll, not less than 50%, but subject to cash flow. Seeing now for our, you know, the type of now we are high gearing, but why we still commit 50% because we have the plan to de-level it,

de-level it for the, we need to make announcement for the vehicle IPO and now we are on the investor back to get the link to do it again. And we believe we can delay the council load that on that one. For the any big investment, currently we have no any big investment that the cap, cap X. You can see the FY21, I will cap X really low, not big. Normally I will cap X four to five million, but this year just about two to three billion only. That's why we have to be careful so we can pay dividend and we have to make it de-level it

to de-level the thing not to high debt. Understood. So as you look around at acquisition opportunities, are there any that are of interest and if so what would be some of the areas that you might consider for inorganic investment opportunities? That's sort of my follow-up part one and then to follow up part two can you please give an idea you know even though we are in somewhat of a lower volume growth scenario currently post-COVID, during COVID and post-COVID, I just want to understand the capacity utilizations that are currently in place at the current point in time and how much further capacity utilization is available before you may need to have any specific capacity increases

or CAPEX increases over and above the level that we are seeing currently. Thank you. Normally, due to we have so many good relationships with all the, one the bank, investment bank, commercial bank, both domestic and overseas. They have, they propose so many M&A, but we are considered. Whenever we have in the economy, we make announcement to the stock market. But now, now, now we just work out on the organic side only. For the capacity, I will hand it over to the chief technology to answer. Hello. For the capacity, we are using just around 50 to 60% of both our facilities and buildings. So, for the big carpeks, it's not in the near future for sure. Thank you.

understood. My last follow-up here, if I may, really quickly, you know, based on the scenario that you're describing capacity utilization in place, dividend payouts and debt reduction, it should seem that in not the distant future, your debt levels may be really quite healthy. They're already well supported, but they may be even quite a bit significantly stronger. You know, I understand that dividend payout is a broad matter, but just to understand and get a little bit of visibility and vision into how you're thinking about either re-levering, maintaining a certain leverage, or increasing a payout policy, or share buybacks. Could you give us a little bit of a longer range view here in the absence of any major

acquisition, how that would evolve? And here, I have not even brought up the vehicle listing. I leave that aside in the current conversation, but even on an organic basis, your debt levels will be very healthy. And I'm trying to understand, is there a target level you would like to maintain at and how you see the payout ratio or share buybacks as some other form of capital return evolving in that scenario? That's my final question. Thank you very much. Okay. My target debt level. Net debt to every dollar less than four. This is my target level. But we would like to keep healthy, healthy, you know that.

Now going forward, in the USA, now this may be the start of the QE and maybe another year or two years, they will start to increase in delays. So we have to be careful with this one. But whenever we have any need to utilize our healthy everything, we will make an announcement. Thank you very much. And good luck for the rest of the year and beyond. Thank you. Thank you. Next question from the Phillips Security Portrait. Please go ahead. Yeah, thanks. Just a question from the serious business. Typically, I mean, after you make a price hike for white spirits, I'm just wondering, what has typically been the past behavior of consumers, or is it limited in fact, I

guess there are no legal alternatives? That's my first question. Can I just trouble you again just on spirit side? What can help the rural economy, especially in the northeast, to help support the spirit consumption? Just a general macro question. These are my two questions. Thank you. In terms of price elasticity for ViseBrick, it's actually not very high. we've seen that on the price increase, our demand will catch up quite quickly. And with the strength of demand in the past 18 months, we see confidence that although the consumer price will rise, it will not affect our volume by that much. So I think it's a good payoff

in terms of price increase versus slight decline volumes near term. So in terms of what would drive the northeastern consumption or even rural area, it's just general economy. I think the return of the service industry, the tourist industry generally would allow Thailand as a country to have a higher GDP. So I think the rest of the segment we think is quite normal. I mean, agricultural, it's seasonal. And so I think that's all the comment we have on this. Okay, thank you. Thank you. We have a follow-up question from CLSA, Lohan Pan, please go ahead. Hi, hello everyone. I just want to have one question if you don't mind

with regards to the timing of the year IPO. I understand the IPO was postponed early this year due to COVID comes. And if you look at the situation now, we are probably in the early phase of recovery and COVID. And so, and tobacco, it looks like the market shares are starting to improve and get better. So there is clearly a need to recovery potential, but it's going to take quite a bit of time to wait to materialize, given how volatile the macro environment can be. So the key question I have is, why at least now, why not later when the economy or consumption spending patterns are better?

Second question to wrap it up with, with regard to the cash proceeds, is management looking for it to use more for M&A purposes or to lead average? Thank you. So we see that you can see Thailand, we used to have more than 20,000 cases a day. Now they do to about 5,000 cases a day. So in Thailand, open the county for two lists, we have a lot of vaccination, First thought, 70 to 80%. Second thought, about 50%. Even in Vietnam, they can control the COVID. But you know now, should I say that now US or the world, the capital market, they start to table the QE.

I feel lucky that they still not in case intelligence. So on my view, it's good time to restart the IPO. If you wait another year or two years, COVID is a normal line. You have to make a vaccination, you have to make a third door. You have to make any protection for this one. But if another one or two years, if the US starts to increase, you will increase, it's difficult for you to sell IPO because the people who like to invest in the debt capital market, they have exactly you. So I think it's a good time to run the equity capital market IPO now.

better than to win. If we receive the positive, the level it, major other to the level it and certain we make for the any new opportunity or for the make any investment that fit to the shareholder and hand the shareholder but major is a deliverer. Okay so if I didn't hear you wrongly I think you're talking about potentially looking to improve the balance sheet of the cash flow fees right and not so much for M and A but for the cash proceeds. Yes correct. Okay thank you thank you sir thank you thank you for the clarity and the question thank you. Thank you we have a

next follow up question from Morgan Stanley Divya please go ahead. Thank you just a couple of numbers that that we were missing from the earlier explanation. Couldn't Bob could you give us the the average price hike that has been taken for the Vice Spirit's business and also what's the current return rate for bottles versus where we were historically before the bottle change. And the second is on the beer business. Could you just tell us a split now between bottles versus cans for both Thailand and Vietnam? Thanks. In terms of Vice Spirit's price increase, DPI asked me six months from now. We haven't finished it, so it's still a trade secret at the moment. So until we then probably finish it in the

second queue. So I think after our first six month number when we have to call our answer to that question. In terms of the used bottle return, it's half, especially the wide spirits, has increased very close to the optimal level. Last year I think I used bottle for large and small running around 30%. This year we are running around sorry 20 to 25%. This year we are closing in about 40-45. So we think that about 55 to 60 will probably quite a high optimal level. So we still have about 10-15% more to go in terms of optimisations of a used bottle. Hi Divya, this is Lester here to talk about the pack split for beer in Thailand.

We are mainly a bottle market, about 87% of our total volumes are bottles, 12% cans and then the balance 1% is draft beer in kegs. So we are primarily a bottle market. I think this is why we focus so much on getting used bottles back because it really drives our costs down when we use higher amounts of used bottles from the market. So for Vietnam, in the past, I mean, the market is about 50%, 65%, 60% can. During the pandemic, it's gone up to above 70%. And primarily because the on-trade outlets are closed. So the lockdown is cool lockdown with the on-trade closed. on-trade in these bottles. But even then, with more than 70 years, we expect that to come

down over time when the on-trade outlets start to open. So we're going back towards the 60s, we believe, in the coming year or two. Thank you. Okay. Thank you very much for the presentation. Thank you. There are currently no questions. If you'd like to ask a question, please press As there's no further questions, we will now begin closing comments. Please go ahead, miss some from our own Souto Rounsi. Thank you for joining Tybesh conference call tonight. If you have any more questions, please feel free to contact IR department at irattybef.com. Thank you and have a good night.