Why ThaiBev's 20.3% profit drop was not surprising at all

Profit was dragged by F&N investment.

According to DBS, whilst ThaiBev's 1Q net profit registered a 20.3% drop in net profit to THB3.45bn, it was largely within expectations. Its top-line declined by 3.6% to THB39.1bn arising from lower sales revenue from beer and non-alcoholic beverages.

DBS also noted that the group’s net profit was also impacted by a net loss attributed to its FNN investment of c.THB727m, arising from an unrealised forex loss (-THB557m), a one-time charge in GO expenses and finance costs (THB400m).

Here's more:

The unrealized fx has been hedged and will mostly be reversed from settlement in the next quarter. Excluding FNN results, the group’s net profit would be THB4.16bn, down only 5.8% y-o-y.

Expected dip in spirits’ volume but revenues increase on higher price. Revenue from spirits increased by 5.3% on the back of higher ASPs with the increase in excise tax in Aug12. Sales volume, however, dipped by 5% y-o-y as distributors carried higher inventories prior to the excise increase. This has since normalised post 1Q, and based on history, sales volume usually recovers within a year. Management is hopeful for a faster recovery.

Weaker beer, non-alcoholic beverage revenue. Beer (-2.8%) was impacted by a price increase in its Archa beer in 4Q, which resulted in distributors stocking up prior to that. Non-alcoholic beverage was down (-38%) due to the cessation of bottling agreement with PepsiCo from Nov12.