14 February 2008 - Asia Pacific Breweries Ltd (APB) began the new financial year with a healthy profit growth for the first quarter ended on 31 December 2007.
Organically, Group profit before interest and tax (PBIT) grew 13% to S$86.9 million. After taking into account translation difference and gestation losses, PBIT stood at S$83.3 million, an increase of S$7.1 million or 9% over last year. Gestation losses refer to the first three years’ performance of greenfield breweries in Vientiane (Laos), Ulaanbaatar (Mongolia) and Hyderabad (Andhra Pradesh, India).
Attributable net profit before exceptional items (APBE) increased organically by 13% to S$46.1 million. Including translation difference and gestation losses, APBE rose S$3.5 million or 9% to S$44 million.
On the results, Mr Koh Poh Tiong, Chief Executive Officer, APB, said, “Once again, Indochina (i.e. Cambodia, Laos and Vietnam) has excelled as our best performing region, reporting a robust volume growth of 37% and a PBIT gain of 23%. Organically, PBIT growth for the region was 36%, excluding the temporary gestation loss from our brewery investment in Laos and translation effect arising from depreciation of US dollars and Vietnamese Dong. During the period under review, both Vietnam and Cambodia saw volume increased by 35% and 43% respectively, driven mainly by strong demand. Contributing to the better results were also achievements by the three breweries which we acquired in Vietnam in the last 2 years – i.e the breweries in Quang Nam, Da Nang and Tien Giang. This stronger set of numbers is a testament to our intra-market growth strategy.”
Malaysia too had a strong showing with an organic PBIT gain of 9% boosted by robust demand which drove volume up by 15%.
Singapore outperformed last year’s results with a 9% rise in PBIT. Driving Singapore’s higher PBIT was a 12% volume growth led by higher export, contract brew and domestic sales. Export volume which surged 22% over the same period last year, accounted for a significant portion of Singapore’s volume gain. Meanwhile, Singapore’s domestic volume grew 4% versus last year.
In New Zealand, a favourable sales mix and a stronger New Zealand dollar have led to a 9% growth in PBIT.
Faring well was also Papua New Guinea, reporting a 12% volume increase and 5% rise in organic PBIT.
On creating shareholder value, Mr Koh said, “APB’s strong beer brands and credible growth strategies are two key pillars of shareholder value. In particular, our growth strategies implemented through greenfield brewery investments and acquisitions have enhanced our scale and depth in the overseas markets. APB’s on-going regionalisation has taken our business to as far as Mongolia where we have set up our first brewery there; and further invested in Indochina and India where our breweries in Vientiane and Hyderabad will soon commence operation in the first quarter of 2008. Although this means that we see some gestation losses in the interim, it is imperative that we sustain expansion to bolster our earnings base and lift future earnings to a higher level.”
“It is also our objective to ensure the continued success of our brands. Apart from offering a wide portfolio of international, regional and local beer brands to secure the different segments of each market, we shall continue to globalise our flagship brand, Tiger, though export; and grow Heineken, the world’s most international beer brand,” added Mr Koh.
OUTLOOK
APB will continue to invest in existing and new markets to secure long term and sustainable profitability of the company. The fundamentals of the business remain sound. Barring unforeseen developments, net earnings for the new financial year are expected to be higher than last year.
Operations Review
Indochina (Cambodia, Laos and Vietnam)
Overall volume went up by 37% and this was driven mainly by strong festive sales. Organic PBIT growth stood at 36%. After taking into account gestation loss from Laos and translation effect arising from depreciation of US dollar and Vietnamese Dong, PBIT grew 23%.
Malaysia
Volume and organic PBIT grew 15% and 9% respectively as a result of strong festive demand.
Singapore
Overall volume grew 12% with export, contract brew and domestic sales outperforming last year. PBIT grew 9%.
New Zealand
Organically, PBIT grew 3% due to favourable sales mix. Taking into account the appreciation of the New Zealand dollar, PBIT grew 9%. Volume improved marginally by 1%.
Papua New Guinea
Volume rose 12% while PBIT increased organically by 5%. The result was driven by higher consumer spending during the festive season, partially offset by higher marketing investments.
Thailand
Volume and PBIT fell by 13% and 57% respectively due to intense competition, economic uncertainties and regulations which restricted consumption and advertising of alcoholic products.
South Asia (India and Sri Lanka) and Mongolia
Losses from Sri Lanka, India and Mongolia stood at $2.7 million due to investments in brand launches and gestation losses from greenfield breweries in Hyderabad (Andhra Pradesh, India) and Ulaanbaatar (Mongolia).
China
Volume dipped marginally by 2% due to intense competition. Losses stood at S$4.3 million due to stiffer competition, shift in product mix and increase in raw material costs.
Corporate Office
Higher corporate expenses were incurred mainly due to higher marketing investments offset by higher royalty income.