Q4 2014 Thai Beverage PCL Earnings Call
Feb 27, 2015 AM EST
Y92.SI - Thai Beverage PCL
Q4 2014 Thai Beverage PCL Earnings Call
Feb 27, 2015 / 10:00AM GMT
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Corporate Participants
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* Sithichai Chaikriangkrai
Thai Beverage Public Company Limited - Director & EVP, Finance
* Marut Buranasetkul
Thai Beverage Public Company Limited - SVP, Non-Alcohol Production/F&B Business Group
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Conference Call Participants
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* Thitithep Nophaket
Phatra Securities - Analyst
* Divya Kothiyal
Morgan Stanley - Analyst
* Sam Chan
Macquarie - Analyst
* Chirag Saglani
UBS - Analyst
* Andy Sim
DBS Vickers Securities - Analyst
* Kenn Shaun
CIMB - Analyst
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Presentation
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Unidentified Company Representative [1]
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(audio in progress) beer and food business. The net profit after (technical difficulty) was THB21,433 million or an increase of 12.8% when compared to last year. This was due to an increase of net profit in spirits and beer business. The Company also lowered its gearing level having net interest bearing debt to equity ratio (inaudible) 0.64 at the end of 2013 to be 0.45 at the end of 2014.
The Board of Directors has proposed to issue a dividend of THB15,320 million or THB0.61 per share, a record high since ThaiBev's listing on the main board of the Singapore Exchange. Please note that the interim dividend was paid last year at THB0.15 per share and the remaining dividend will be THB0.46 per share.
Further highlight of 2014 operations. Although there are many negative factors such as the excise tax hike in the late 2013 and a political unrest in the first half of 2014, the Company has been able to grow profitability and maintain market leadership in spirits business. Sales revenue of spirits business in 2014 were THB104,592 million or an increase of 4.7% year-on-year. This was mainly due to an increase in sales price, while the net profit of spirits business saw an increase of 6.4% compared to last year.
Overall beer performance in 2014 continuously indicated an improvement in momentum. The sales revenue of beer business in 2014 (technical difficulty) representing 6.9% year-on-year growth due to an increase in sales price. Net profit of beer business in 2014 was THB396 million, representing an increase of 188.6% or THB843 million from the net loss registered in 2013.
Sales revenue registered by the non-alcoholic beverages business in 2014 was THB15,775 million or a decrease of 7.3% compared to last year. The non-alcoholic beverages affected from the slowdown of on-premise consumption during the political unrest, while the net loss of the non-alcoholic beverages business in 2014 increased slightly by 0.3% year-on-year. Expanding ThaiBev's non-alcoholic beverages business is one of our core growth strategies and we will continue investing in and diversifying our non-alcoholic beverages products in both domestic and international markets, so as to become the leading total beverage company in the region.
Sales revenue of food business increased 10.5% year-on-year. This was mainly due to an increase in the number of restaurant branches and an increase in sales price. However, the political unrest which lead to the decline on on-premise consumption and the increase in staff costs, rental costs and depreciation resulted in the net profit drop to THB74 million for the full segment.
Sales from international business in 2014 continued to grow 24% compared to last year. The beer growth was satisfactory in all markets, especially Chang Beer sales in ASEAN. In addition, net sales of Scotch whisky and its volumes reported double-digit growth in 2014.
We will now open the call to any questions on our results. Operator, please open the line for Q&A.
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Questions and Answers
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Operator [1]
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Thank you. We will now begin the question-and-answer session. (Operator Instructions) Thitithep, Phatra Securities.
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Thitithep Nophaket, Phatra Securities - Analyst [2]
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I have three questions. Number one, you have recently launched 100PLUS in Thailand, can you tell us the business model of 100PLUS in Thailand between you and F&N. I mean, are you the bottler, are you buying the product from them and distribute it in Thailand? What is the relationship between you and F&N on that particular product in Thailand?
Number two, I have noticed that you have raised dividend policy up to 70% in 2014. Since your net gearing has now come down to an acceptable level, should I assume that you will keep the policy at 70% going forward? And number three, because of a fall in the gross margin and then a sharp rise in SG&A, beer division plunged into loss in the fourth quarter of 2014. I'm not sure if that is seasonal, because you spend a lot on marketing in the fourth quarter. Should we expect the beer to return to profitability in the first quarter of this year. Thank you, I have three questions.
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Unidentified Company Representative [3]
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Actually the relationship between ThaiBev and F&N, we buy concentrate from F&N and (inaudible) our bottler and also distribute the product, nationwide throughout Thailand.
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Thitithep Nophaket, Phatra Securities - Analyst [4]
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So, is it fair to say, you buy the concentrate at a [big] cost and then you don't have to share the upside with F&N, right. You only pay them for the concentrate, not the revenue (inaudible).
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Unidentified Company Representative [5]
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Yes. Actually for the beginning of the launch during the first two or three years, F&N (inaudible).
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Thitithep Nophaket, Phatra Securities - Analyst [6]
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Just buy the concentrate.
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Unidentified Company Representative [7]
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Yes, we just buy the concentrate from them.
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Thitithep Nophaket, Phatra Securities - Analyst [8]
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Right. Okay, but you will be responsible for the marketing expense and everything.
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Unidentified Company Representative [9]
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Yes. They will support, the marketing expense must been on the (inaudible) and they want to also expand in Thailand. So any of the marketing expense, we will --.
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Unidentified Company Representative [10]
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50-50.
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Unidentified Company Representative [11]
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I think we'll have 50.
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Unidentified Company Representative [12]
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Bottom line and below the line. For us, (inaudible) but the other one, we'll have a operator in Thailand. So we include that also, and we include above the line and below the line, so which adds 50-50 on this one.
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Thitithep Nophaket, Phatra Securities - Analyst [13]
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Alright, okay. Thank you.
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Unidentified Company Representative [14]
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So for Sithichai, CFO, actually you know Thitithep our dividend policy, we paid -- you said that then others, not less than 50%, not subject to the capital until this year since our performance too lead by the liquor -- followed by the beer and (inaudible) later. But since the debt reduced a lot. The debt reduced [about 25%] and the debt ratio reduced a lot. So this is the time that we would like to give back to the shareholder, took advantage of shareholder benefit (inaudible) payout ratio.
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Unidentified Company Representative [15]
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Next year, (inaudible).
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Unidentified Company Representative [16]
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Yes. It feels that (inaudible) is subject to the performance, particularly (inaudible).
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Unidentified Company Representative [17]
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Then the three, it's about profitability in the beer business. I just recap the year, we end the year with a net profit of THB396 million and a positive EBITDA and the EBITDA level of THB1.265 billion. If you look at the string in EBITDA, the net change in EBITDA year-on-year from 2014 to 2013 in roughly about THB1 billion in string of EBITDA from negative to positive. There were change on net profits of THB843 million. So we want to happily say we made money for the year.
Export volumes grew over 30%. We had about 15% in export volumes, that compensate for the slow and declining market in 2014 due to excite tax and economic environment. The total volumes for beer that we sold in 2014 compared to 2013 by volume are just slightly below the year before. So we -- basically, we about flat on volume sale, we are up on profit.
In the fourth quarter, we had a bit of housekeeping we done with some of the old packaging that we discontinue. We are streaming line certain brands and strengthening certain brands with some [POP], some dry goods, material that we think we just need to do some housekeeping. So that's kind of like causes that and together with the fourth quarter being a quarter where we did a bit of marketings as planned.
So proudly to say we end the year profitably and market shares are maintained. From 2014 end year in market share compared to the year-end market share in 2013, the market share in Thailand have been maintained with more Chang beer being sold and a bit less of Archa beer. So we have been selling the brand that make the more sense for us with [Export] brand.
We are continuing to expect to do okay in first-Q. ACNielsen reported the beer market in January grow about 5% year-on-year from the month before. So that's as much as we can tell at the moment, and that's January report. The February report, we are optimistic about the beer market at the moment.
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Operator [18]
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Divya, Morgan Stanley.
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Divya Kothiyal, Morgan Stanley - Analyst [19]
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I wanted to ask the first question on the spirits business. We notice that the SG&A spend during the quarter for spirits was particularly high, actually grew about 25% and even on a full-year basis, on a per liter basis for spirits, the SG&A spend were up about 8%. Could you tell us as to any drivers for this higher increase in SG&A spend for spirits in particular since this is typically a more stable business?
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Unidentified Company Representative [20]
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Okay. The high SG&A in quarter four was because of two reasons. One is a bit on the investment on the brand, on A&P, because if you remember last year at Q4, just to ride on the street, we can't do much there. But this year, I think it's okay now. But the other one is accounting problem -- just an accounting issue, because last year, we have budget to pay 2.5 month bonus. So we accrued from the beginning of the year 2.5 months pro rata, but at the end because the result is good, but not that good, so we pay only two month and then we have to sort of reverse back in the last quarter that amount. But this year is opposite. This year, we budget for two months, and we do too good. So we paid 2.25 months. So that will be the big different there and it's only one time. Okay. It's a yearly adjustment, that's the big increase there.
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Divya Kothiyal, Morgan Stanley - Analyst [21]
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Okay, got it. And just continuing on the spirits business, could you share with us for the full year what the growth in terms of volumes was between brown and white spirits. And also your outlook for this year, especially you can view some improvement in the beer industry already, so do you expect brown spirits to come back this year in any fashion?
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Unidentified Company Representative [22]
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Okay. Last year, we have a bit of problem with brown spirit, because of the consumption decline a lot due to the situation that the same as beer. Nielsen report that last year the consumption declined by 8.5% total, 8% local and 22% international brands. But our sales declined by some 10% or 11%, because of the destocking. But we do not care on the white spirit, because the white spirit growing like 5% with a very big volume, that's why the total spirit for ThaiBev has declined some like 0.9% -- 0.8% to 0.9% in term of volume, but then we grew slightly because of the price increase.
This year, the situation is similar to beer, but not as good as beer. Nielsen report that the consumption of the brown spirit increase 2%, beer is 5%, but brown spirit is coming back at 2% growth in term of consumption in January. That's all I can say and in the first two months, I mean, similar to beer and still sleep very well.
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Divya Kothiyal, Morgan Stanley - Analyst [23]
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Okay. So we can actually expect a little bit of mix change this year with brown spirits coming back, right?
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Unidentified Company Representative [24]
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Yes. But I don't want to be too optimistic. The other business is doing a bit better, but it will not go back to the like 2012 level, because a problem is possible, income for the consumer due to high percent of debts today, because the -- if you remember they bought first car that will be haunted them for another three years. So, but anyway, it should be better than last year. It certainly declined like 8% anything, but hopefully (inaudible) that the market consumptions come back to small growth, but not going to be very big. We still hope that the white spirit will continue to grow because we believe that the total consumptions will be the same, it's just what they are drinking depend on economic situation that's why we always said our company is very strong because of the three buckets, beer, white and then brown. So overall, I feel quite confident that I can get (inaudible).
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Divya Kothiyal, Morgan Stanley - Analyst [25]
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But overall, I mean if we don't look at it from brown spirits and white spirits perspective, overall spirits volume you still expect to grow this year at the same 2%, 3% levels that we've been seeing in the past?
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Unidentified Company Representative [26]
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I can't say that speculate, but you can -- it depend, I mean you just do your model like that, I think it should be okay with you.
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Unidentified Company Representative [27]
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I think just to add, it's important where you see the economies of Thailand and the consumption. I think that that's also from the economics and from your economists probably can estimate what the economy in Thailand would be, and therefore with the size of our business and size of our all business, if the economies are growing, consumers are spending, we are bound to be receiving that positive trend. But if the economy is not doing well and the consumer not spending, obviously it could affect us. I think that's back to the macro story, it's not so much about us, it's about the economy.
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Divya Kothiyal, Morgan Stanley - Analyst [28]
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Okay, my second question was just one follow-up on the beer outlook. On the beer side, you had mentioned that on a SG&A per liter basis for the full year, the internal target is to keep that flattish, but it did actually increase about 10%, 11% on a full year basis and obviously much higher in the fourth quarter.
Can you talk about how this -- you're looking at this for 2015 and also comment on the pricing strategy for beer, is there any intention to actually raise prices for Chang to bridge the gap between Chang and Leo to a certain extent?
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Unidentified Company Representative [29]
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So the questions you have is cost and price?
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Divya Kothiyal, Morgan Stanley - Analyst [30]
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Yes, the SG&A per liter and the pricing, yes.
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Unidentified Company Representative [31]
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Yes. I think where we are -- where we end the year last year is probably where we heading into for 2015. I mean I wouldn't comment more on that. We juggling around how much we are spending this year, we allocated some money, but that costs about the same. We are not expecting to cut the spending that we spent on SG&A from last year. If the volume do grow then -- if we can sell more volumes, then the SG&A per unit will probably come down. But if you look at SG&A per unit, what we have and we may have a 2.5% slide in volumes, so that could go up slightly as well.
As to pricing strategy, we always keep an eye on indexation to the main competitive brands. As a brand, we have the number 2 brands in the market. So we actually do keep close eye on what are the price of the number 1 brand and the number 3 brands and where we are. If the number 1 brand do make price movement, meaning up the price, we'll probably will have to require us to keep that index. Meaning, we may have to up our price, but at the moment, the pricing gap that we have with the main brand closing in slightly from last year -- closing slightly.
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Divya Kothiyal, Morgan Stanley - Analyst [32]
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The gap has closed in because of your prices going up or their prices coming down?
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Unidentified Company Representative [33]
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We have look at -- I think when we say pricing gap, I have to disclose that we are referring to the retail price. When we monitor the retail price, monitor how much consumer is spending, the retail price per unit and which mean the retailer adjusts the margin somewhat and somewhat of that price increase have been, we will use some of our [trade use]. So effectively, pushing the price up somewhat. So, the gap has been closed. I think the competitor has so far maintained their price. We closed the gap by cutting some of the trade use and the supply chain is also increasing certain margin. So that's why the price move up.
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Divya Kothiyal, Morgan Stanley - Analyst [34]
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Okay, got it. And my last question was just on the non-alcoholic beverage segment. Can you give us some indication, losses have been more or less flattish on a year-on-year basis for the full year. Is 2015 a year where we expect losses to narrow or is that too soon?
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Unidentified Company Representative [35]
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We expect that the loss will be narrower from this year, because we have been projected to have more sales in the new products or new brands in new country or new markets for this year.
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Operator [36]
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Sam, Macquarie.
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Sam Chan, Macquarie - Analyst [37]
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I just want to confirm a earlier answer that you gave. So is beer export volume growth for 2014 up 30%, and the export volume contributed [15%] of your total beer this year, 2014. Is that right?
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Unidentified Company Representative [38]
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Yes, that's right.
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Sam Chan, Macquarie - Analyst [39]
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And I think I have one question (inaudible) in our financials, the input cost going forward because I (inaudible). So just want to know how is that trending for raw material prices?
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Unidentified Company Representative [40]
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You're talking about the raw material, the molasses? Molasses price this year -- we increased slightly from last year, but we usually stock up quite a lot from the old cost. So average price probably up slightly, not much.
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Sam Chan, Macquarie - Analyst [41]
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Thank you. How about packaging and (inaudible)?
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Unidentified Company Representative [42]
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No. Actually, it's not much of an inflation because when we deal with our supplier, we had a big -- we are a big customers who we deal, we have a pretty good deal, yes. I think it's not, not much, not much.
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Operator [43]
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Andy Sim, DBS.
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Andy Sim, DBS Vickers Securities - Analyst [44]
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A few questions have been answered, but I had -- just sort of confirming that's all this with ASP my numbers. You show a dip in ASP by about 4%, 5% in fourth quarter year-on-year. Just want to know, is it due to higher proportion of white spirit versus brown spirit on the product mix itself?
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Unidentified Company Representative [45]
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Yes, exactly. You're correct.
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Andy Sim, DBS Vickers Securities - Analyst [46]
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Okay. It's more of a white spirit versus brown spirit.
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Unidentified Company Representative [47]
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Yes.
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Andy Sim, DBS Vickers Securities - Analyst [48]
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Okay. Thanks for that. Second point is more -- just a confirmation with respect to dividends. I think you mentioned that dividend policy is more than 50%, but I just want to get some confirmation that if you look the dividends since IPO, I think the dividend per share has never dropped even though (inaudible) has flat or marginal decline since [2006]. So given that notice, some in terms of the dividend per share, let me tell you that the promise has been good. Can we get (inaudible) dividends per share?
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Sithichai Chaikriangkrai, Thai Beverage Public Company Limited - Director & EVP, Finance [49]
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Sithichai speaking. So I want to consider (technical difficulty) it's up to the performance of that time, but now and then we acquired (inaudible). They keep the performance to our performance until apart from the (technical difficulty) operation. And this year, we have the -- on the debt side, so we can see that in the (technical difficulty). So I confirm that our dividend policy now with that 50% not subject to capital.
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Andy Sim, DBS Vickers Securities - Analyst [50]
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Okay. And since (technical difficulty) on the line, and another question is related to the debt maturity profile. I notice that of the debt of about THB49 billion, I think about [THB22 billion -- THB21 billion, THB22 billion is due in 2015]. Could you give some indication on this maturity of debt, are you going to refinance a part of -- for this debt that is due in this year in 2015?
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Sithichai Chaikriangkrai, Thai Beverage Public Company Limited - Director & EVP, Finance [51]
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Sim, we can see that (technical difficulty) So now we have a plan to (technical difficulty) similar role we played in the other. So it comes to the (technical difficulty) in the near future.
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Andy Sim, DBS Vickers Securities - Analyst [52]
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Okay. And last question, a small on non-alcoholic beverage was operational, just the fourth quarter volume numbers (inaudible) Oishi volumes that they keep at above 17%, 18% and I think if you strip out the volume, seems to have weakened slightly. I just want to see and understand in terms of the -- what is the market -- the reason for this (technical difficulty) going forward.
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Marut Buranasetkul, Thai Beverage Public Company Limited - SVP, Non-Alcohol Production/F&B Business Group [53]
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Hello, this is Marut. You asking about the volume of (technical difficulty) and you asking about the trends that will be going forward. As you say, we project the sales will be improved for the budget in the year 2015. But due to the seasonal effects like (technical difficulty) in December last year, the sales is -- sales is dropped, because of the -- we have not extended the campaign that launched to the consumer as we foresee that we don't want to carryover the stock from last year to this year. Project for our (technical difficulty) tend to be moving forward to this year as well.
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Operator [54]
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Chirag, UBS.
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Chirag Saglani, UBS - Analyst [55]
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Congratulations on the fantastic dividend. I think, shareholders will be very excited and expecting it again next year, but. Just two questions from me. One is I wanted to touch upon that point on Oishi volume decline again. Could you give some picture about the kind of market share between Oishi and the competitor are currently, because when we look at revenues for Oishi beverage and (inaudible), I can see that their revenues are higher. So, is it that because they're getting revenues from some other sources as well, which shows that their market share could be higher, but in effect Oishi that leading in market share. That's my first question.
And second in terms of synergies in the non-alcoholic beverage, could you kindly list the two or three top opportunities that you're seeing and already started implementing? I mean, the first I think is obviously the 100PLUS launch in Thailand. Apart from that, could you list the other top two or three places where we could see some progress in terms of financial contribution coming in the next 12 months or 24 months? Thank you.
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Unidentified Company Representative [56]
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Okay. Talking about the market share of the (inaudible) last year, actually we lead the market share by 42% at the end of December 2014. Our competitor is about 41%. This is -- I'm talking about the latest, the end of the year market share. But if you consider as the average of the years, 2014, the number is -- it's a different number. But Chirag, when you channelized from the P&L of [one member], I think I'm not sure that for our competitors, the sales revenue coming mainly from the product that they sell or for the added cost. But from our side, the trend -- not the trend, the volume (inaudible) are lower than 2013. The reason is because we try to reduce the promotion campaign from the year 2013 as we have made it for four times a year to the -- last year, we made only one times a year. Because we want to strengthen our brand, we don't want to do too much or too many of the promotional campaign to increase the sales. And the other factor is because of the [in front of] low factor like external one, the mood and tone of the consumer last year maybe because of the political unrest effect. But for this [quarter] --
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Chirag Saglani, UBS - Analyst [57]
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Could you tell us about the average market share for the full year between Oishi and Ichitan?
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Unidentified Company Representative [58]
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The average, we are about 38%; they are 43%, 44%.
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Chirag Saglani, UBS - Analyst [59]
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So you have been catching up as the year progressed and probably we should see those benefits come into 2015?
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Unidentified Company Representative [60]
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Yes.
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Unidentified Company Representative [61]
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That's right, because the last three months, we [gained] up many of the point of the market share. We are now leading the market, about 42%, 43%.
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Chirag Saglani, UBS - Analyst [62]
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Okay. Okay, fantastic.
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Unidentified Company Representative [63]
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Yes. And the next one, the next [quarter], we came in [gained] market share about 12% to 13%. This kind of the drop in the overall industry of the [ASP] because of the trend of the consumer and maybe turned into the like the (inaudible) something like that, but yes, (inaudible) a good job to maintain a market share about 12% to 13%.
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Unidentified Company Representative [64]
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Plus some synergy.
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Unidentified Company Representative [65]
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Because of the synergy to the ThaiBev -- both ThaiBev and F&N as well and this year, we are going to have [excellent] launch in Malaysia, say like Oishi that we already launched in Malaysia this year for last year and the other sort of revenues will be from (inaudible) that we already launched in Thailand since early this month and the sales forecast is now like four or five times lower than our projected.
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Chirag Saglani, UBS - Analyst [66]
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Okay, fantastic. Are these plans also planning to be launched in other countries in this year or that will probably be over the longer term?
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Unidentified Company Representative [67]
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Actually the answer to be from F&N, because they are the (inaudible).
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Chirag Saglani, UBS - Analyst [68]
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Okay, okay.
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Unidentified Company Representative [69]
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Chirag, congratulation on your projections.
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Chirag Saglani, UBS - Analyst [70]
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It was actually exactly in line, yes, thank you very much and congrats again for the fantastic dividend. Thank you.
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Unidentified Company Representative [71]
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Thank you.
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Operator [72]
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Thank you. Shaun, CIMB.
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Kenn Shaun, CIMB - Analyst [73]
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Hi, thanks very much for your candid answers so far to the questions. What -- I would like to sign off the question asked is on beer outlook. So do you foresee beer continuing to grow at this percent rend volume in the year ahead and do you expect any margin compression? And second question will be on the prior situation, bending on the ground, are you seeing any [as the substitution to what is there]? Is this also affecting beer sales domestically, because I mean I hope you get a higher alcohol per buck (inaudible)? Yes. These two questions, yes, thank you.
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Unidentified Company Representative [74]
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Okay. On the first questions, the growth in export sale happen to be the domestic and export ratio is 85% 15% to be maintained. Margin compression in the national market, we do not see margin compression in those market. We continue to see good margins in our export products. As for the domestic, it's depending on the competitions and the marketing spends which I outlined earlier. As for their substitute products, we don't see people stepping -- getting out beer going to [light] spirit. That's not believe where the substitute is.
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Chirag Saglani, UBS - Analyst [75]
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Okay. Thank you.
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Operator [76]
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Thank you. Thitithep Nophaket, Phatra Securities.
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Thitithep Nophaket, Phatra Securities - Analyst [77]
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Yes, hi, thank you. I have two questions. Number one, can you give us an update on the Myanmar brewery? I think, the last time you heard is that the [Competition Committee instructed] the two side to make an agreement on the selling price and then it went quiet. And then, number two question is on the white spirit sales in January, you mentioned that the -- according to [newsline, a barrel] is growing by 2% year-on-year in January. I am not sure, if you already mentioned about the white spirit in January. Thank you.
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Unidentified Company Representative [78]
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Yes. Thitithep, on white spirit, the [newsline] didn't have research on that, but I think we feel okay on the January and February. It's still on the upward trend.
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Thitithep Nophaket, Phatra Securities - Analyst [79]
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Right.
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Unidentified Company Representative [80]
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Okay. So, the update on Myanmar, (inaudible).
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Unidentified Company Representative [81]
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Once again, just remind to investor we ThaiBev own about 28% of Fraser and Neave, Limited. Fraser and Neave own 55% in that JV. So, Fraser and Neave is an associate company of Thai Beverage. As for the disclosure of the ongoing arbitration, we would caution the investor to review the disclosure of Fraser and Neave, Limited, as from time-to-time that they make their appropriate announcement and maybe we wouldn't comment further as to what next for that from what could be the outcomes of the arbitration process. Thank you.
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Unidentified Participant [82]
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(technical difficulty) Hello, (inaudible).
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Operator [83]
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Could you hear me? Do you have any further question?
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Thitithep Nophaket, Phatra Securities - Analyst [84]
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No, no. I had two questions, Thank you very much.
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Unidentified Company Representative [85]
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Thank you.
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Unidentified Company Representative [86]
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Okay. Sorry, [couldn't hear]. Can you repeat your question to the speaker, please?
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Unidentified Company Representative [87]
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No, actually, we are done. It's done. We already gave the response.
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Unidentified Company Representative [88]
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Hello, [Arun], you can get to the next question.
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Operator [89]
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Sure. Thank you. (Operator Instructions) [Sean, One North Capital].
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Unidentified Participant [90]
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Hi, good evening everyone and thanks again for [opportunity] to join this call. I have a question, so just to clarify on the spirits, beer business as well as [K-Pac]. On the spirits side, could you just help us (inaudible) to get a sense of the revenue trajectory this year, your thinking behind that and your best estimates on the EBITDA margin targets? And I've got a question on beer to follow after that. Thanks.
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Unidentified Company Representative [91]
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I cannot speculate that, but I can say that, okay, now, we definitely go in for higher revenue and profit, and we still believe that if nothing serious happen during the year, we should be able to do it. That's all I can say. I think beer probably the same, we can't say very much. Okay?
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Unidentified Participant [92]
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Okay. On the beer side, (inaudible), what's the price gap right now on the retail side that you see between Chang, to Singha, and the gap between Archa to Leo? Can you just remind me?
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Unidentified Company Representative [93]
------------------------------
Actually, it's Chang, could you compare with Leo, Singha is another category. The Archa is the lowest, then Chang, the Leo and the gap -- (inaudible), can you tell the gap of retail?
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Unidentified Company Representative [94]
------------------------------
(technical difficulty) we capture the number 1 brands as a brand in Thailand for beer is Leo and it's made by one of the competitors, which basically the one who brews [Sing Beer], right. The number one brand is Leo. The number two brand is Chang Beer, which is brewed by us. And the two brands combine more than 90% of the market. So the rest are marginal brands, including (inaudible) Heinekens and Archa. So those are just marginal branding and where you position your branding. We do target against our main competitor brands, which - about 45% discount over that, their main brand. So (multiple speakers).
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Unidentified Participant [95]
------------------------------
Okay.
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Unidentified Company Representative [96]
------------------------------
Meaning that they are 100%, we are about 95%, 96% pricing. (multiple speakers). Sorry, we're not talking about brand, we're talking about pricing index and Archa brand pricing index about [at about] 90% to the main brands. And as for Heineken, they would probably from the main brand pricing upward by probably another 15% and Singha is somewhere close to Leo. I think they don't actually gain pricing premium over Leo, maybe only 1% or 2% pricing premium over Leo. That's for all brand we discussed. That's pretty much 99% we're marketing.
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Unidentified Participant [97]
------------------------------
Got it. Got it. [Interesting stuff]. Thank you. And can I just clarify when you talk about the retail price get narrowing and narrowing or I just heard, the line wasn't very clear. Just want to be clear that you have not actually raised your ASP that much as much this year. It's just that your wholesale is a channel that has been raising the prices to improve their margins. Is that correct?
------------------------------
Unidentified Company Representative [98]
------------------------------
The price per case that we sell, we didn't change. We've maintained this price since the last tax increase. It is the margin within the [change], it is the trade deal that we may have without teaching a distributor that narrowed, meaning if we include we offer on a trade deal without a distributor may be different. But the list price we sell to our agent remain the same.
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Unidentified Participant [99]
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Okay, great stuff. Okay. And just two more questions. One is related to CapEx. Can you just remind me what your CapEx would be for this year? And if you could just give a breakdown by spirits, beer, Oishi, Serm Suk? And then, the last question will relate to the capital structure.
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Unidentified Company Representative [100]
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(inaudible) so the year 2014, our total capital (inaudible).
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Unidentified Participant [101]
------------------------------
Sorry, sorry, can I get for 2015 your guidance for CapEx?
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Unidentified Company Representative [102]
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For 2015?
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Unidentified Participant [103]
------------------------------
Yes.
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Unidentified Company Representative [104]
------------------------------
[It's now likely] the year 2014.
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Unidentified Company Representative [105]
------------------------------
Roughly the same.
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Unidentified Company Representative [106]
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Roughly the same.
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Unidentified Participant [107]
------------------------------
Okay, okay. And then what about -- how would that split across the spirits, beer, Oishi and Serm Suk?
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Unidentified Company Representative [108]
------------------------------
I think quite the same also for the year 2014.
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Unidentified Participant [109]
------------------------------
Okay. The amounts will be the same across all these business lines?
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Unidentified Company Representative [110]
------------------------------
Yes.
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Unidentified Participant [111]
------------------------------
Okay. Okay. Could you remind me why you need to continue to have such high levels of CapEx for the spirits business given that volumes are pretty flat, flattish over there?
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Unidentified Company Representative [112]
------------------------------
It's actually -- in the UK, Scotland, because they have pretty good sale on the (inaudible).
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Unidentified Participant [113]
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How much would that be of that, the CapEx spend for this year?
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Unidentified Company Representative [114]
------------------------------
For the year 2014, THB1.6 billion; on the expansion, it's about -- call for THB1 billion in the year 2014.
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Unidentified Participant [115]
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THB0.4 billion?
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Unidentified Company Representative [116]
------------------------------
Yes, on the year 2014.
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Unidentified Participant [117]
------------------------------
Sorry, THB0.4 million or THB0.4 billion?
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Unidentified Company Representative [118]
------------------------------
THB0.4 billion.
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Unidentified Participant [119]
------------------------------
THB0.4 billion, okay. So that was in 2014. So this year, your -- you wouldn't need that spend, so your CapEx for spirits will be lower by that amount?
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Unidentified Company Representative [120]
------------------------------
This year 2015, we have that full-year 2014, (inaudible).
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Unidentified Participant [121]
------------------------------
I see. I see. So I'm just looking so excluding your CapEx for the Scotland, this CapEx for domestic for spirits is still pretty high, around THB1 billion?
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Unidentified Company Representative [122]
------------------------------
(inaudible).
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Unidentified Participant [123]
------------------------------
Sorry.
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Unidentified Company Representative [124]
------------------------------
It's a maintenance CapEx.
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Unidentified Participant [125]
------------------------------
That's a maintenance CapEx?
------------------------------
Unidentified Company Representative [126]
------------------------------
Yes.
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Unidentified Participant [127]
------------------------------
Okay. Alright, okay. And could I just talk about your capital structure and note that net debt-EBITDA is now down to 1.7 times. What do you think it would be by 2015?
------------------------------
Unidentified Company Representative [128]
------------------------------
It should not be high from the normal situation. (multiple speakers) being down, it should not be higher than this except we have the (inaudible) but based on the normal operation, (inaudible).
------------------------------
Unidentified Participant [129]
------------------------------
Right. So your net EBITDA will continue to trend down and so I'm just thinking, I mean I'm just using -- assuming [growth] of your net [debt] EBITDA could come down to almost one time by 2017 and for your plans there, the capital structure because it's (multiple speakers) expansion investment?
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Unidentified Company Representative [130]
------------------------------
(inaudible).
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Unidentified Participant [131]
------------------------------
Sorry?
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Unidentified Company Representative [132]
------------------------------
(inaudible) for net debt to EBITDA is at 2.5 times.
------------------------------
Unidentified Participant [133]
------------------------------
Yes.
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Unidentified Company Representative [134]
------------------------------
So I mean, for the normal situation, not exceeded 2.5 times.
------------------------------
Unidentified Participant [135]
------------------------------
So you are saying you are comfortable going up to 2.5 times, net debt EBITDA.
------------------------------
Unidentified Company Representative [136]
------------------------------
No, not goal. If we didn't have any significant M&A, over 2.5 times, our threshold.
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Unidentified Participant [137]
------------------------------
Okay. Can I get a sense that you still have appetite for M&A?
------------------------------
Unidentified Company Representative [138]
------------------------------
Oh, yes. It is subject to the opportunistic, if I am a shareholder, you consider that --.
------------------------------
Unidentified Participant [139]
------------------------------
Okay. Okay, all right, thank you very much. And I hope to hear more good news like M&A in the year. Okay, thank you very much.
------------------------------
Unidentified Company Representative [140]
------------------------------
Thank you.
------------------------------
Unidentified Company Representative [141]
------------------------------
Thank you.
------------------------------
Operator [142]
------------------------------
Thank you. [Marian], Morgan Stanley.
------------------------------
Unidentified Participant [143]
------------------------------
My first question is on [Sunsilk]. Can you get some update on market share trend for [Sunsilk S-cola]? I hear that carbonated soft drink shares has grown in the fourth quarter versus a decline for the nine months. Also how much of an improvement in utilization rates do you expect from being the partner for F&N's 100PLUS, so introducing (inaudible) in Malaysia?
------------------------------
Unidentified Company Representative [144]
------------------------------
(technical difficulty). Okay, the share of (inaudible) overall about 12% to 13% last year end of December. The sales of last quarter also increased as you know we have [members] we have full internal promotion and aim and also (inaudible) to capture that market deployment. And the last one is the utilization of the closing capacity of that, so after we decide to have in the past for this year, the utilization is higher and we are now running top of the capacity because of the outlook for cash (inaudible).
------------------------------
Unidentified Participant [145]
------------------------------
Okay.
------------------------------
Unidentified Participant [146]
------------------------------
Sorry, so what would your utilization for P&L?
------------------------------
Unidentified Company Representative [147]
------------------------------
(technical difficulty). For the utilization of both (inaudible) is now 100%. And the rest is the (inaudible) about 50%, but we have a plan to introduce the (inaudible).
------------------------------
Unidentified Participant [148]
------------------------------
Okay. Can I also just clarify your market share trends? So, it was 14% at the start of the year (inaudible) you said, right?
------------------------------
Unidentified Company Representative [149]
------------------------------
Yes, yes, that's right. We have that from the beginning of the year last year about 10% to [11% and come up to 13%].
------------------------------
Unidentified Participant [150]
------------------------------
Okay. Thank you. [Do you have] any expectations on excise tax helps this year [in another] weak purchasing power of consumers and also any updates on the F&N and FCL ownership structure? (inaudible) will be interested in bank F&N model arbitration is do upon going.
------------------------------
Unidentified Company Representative [151]
------------------------------
I respond about the tax. The excise tax, actually the government has passed the so-called spot tax, which means that they would like to tax us another 2% of the excise to support the spot activities in Thailand. But at the moment is still waiting for the finalization, but it will come, we believe that it will come [about] either April or beginning of April, the second quarter, but our policy is to pass to the customers so we probably don't expect to have any [internal] relation in margin, but your questions about whether the consumer can stand that, it's not very much is roughly 1% to 2%, 1% of the sales, so it should not affect very much. I think like (inaudible) said before is the macroeconomic this matter, not this one; this one, I don't see any great impact, but we definitely will retain our percentage margin. And the second question?
------------------------------
Unidentified Company Representative [152]
------------------------------
For that its Sithichai, CFO, now for the one with -- we haven't focused on the THB1 million. Eventually we will focus to all the on the spirit volume but not yet in the -- to start the life time to meet the -- you can make margin on that as well.
------------------------------
Unidentified Participant [153]
------------------------------
Okay.
------------------------------
Unidentified Company Representative [154]
------------------------------
And the second question --
------------------------------
Unidentified Participant [155]
------------------------------
Okay, thank you so much.
------------------------------
Unidentified Company Representative [156]
------------------------------
Thank you.
------------------------------
Unidentified Participant [157]
------------------------------
(technical difficulty) My question has actually been answered by the earlier [throughout] analysts, so that's fine, thank you. No other questions from me.
------------------------------
Operator [158]
------------------------------
Thank you. Next follow-up question (technical difficulty).
------------------------------
Unidentified Company Representative [159]
------------------------------
Thank you.
------------------------------
Unidentified Participant [160]
------------------------------
Hi, it's me again. (inaudible) when you say that (inaudible) is well received by the market and the sales so far is so much higher than the target. Are you referring to the target of THB2.5 billion in the -- I was in the first year, sales, it's [caught by press].
------------------------------
Unidentified Company Representative [161]
------------------------------
Yes. Actually what we targeted is about like the less than a number I talked in the press about the -- the number that I had talked in to press, we foresee the possible opportunity that the sales (inaudible) can be recorded in this year because at this time, as I just mentioned, we have about four to five time of the overall business for cash but because of the spirit, the period of the pipeline when -- normal sales season I keep say that may be not, it's probably maybe two or three times.
------------------------------
Unidentified Company Representative [162]
------------------------------
(inaudible). This is the period of the pipelining. It just show that its trade acceptance was excellent. They really believe in the product. It's lot more than we expected. But when we talk about consumer, we probably have to wait for one or two months to see the consumer, but I can see even though we haven't stopped to advertising on media, we start to have the repurchase already at the retail shop level. So we are quite happy with it. But it's have to be wait and see for the next two months whether the consumer will be excited about as much as trade, right now the trade is so excited. That's why we cannot keep up with the demand right now.
------------------------------
Thitithep Nophaket, Phatra Securities - Analyst [163]
------------------------------
Right. Okay. Can you give us some maybe any ballpark of the sales, maybe like the target market share of the Company [itself being] market of --?
------------------------------
Unidentified Company Representative [164]
------------------------------
Thitithep, can we talk to you on the first quarter conference call? We will know a lot better.
------------------------------
Thitithep Nophaket, Phatra Securities - Analyst [165]
------------------------------
Right, right.
------------------------------
Unidentified Company Representative [166]
------------------------------
Okay. Just leave it, leave it there. We are happy with it.
------------------------------
Thitithep Nophaket, Phatra Securities - Analyst [167]
------------------------------
Thank you.
------------------------------
Unidentified Company Representative [168]
------------------------------
Yes, okay.
------------------------------
Unidentified Company Representative [169]
------------------------------
Thank you.
------------------------------
Operator [170]
------------------------------
Thank you. There are currently no questions in queue. (Operator Instructions). (technical difficulty). I will now hand the session over to (inaudible). Please go ahead, ma'am.
------------------------------
Unidentified Company Representative [171]
------------------------------
Thank you for joining Thai Beverage conference call tonight. If you have more questions, please feel free to contact IR department at ir@thaibev.com. Thank you and have a good night.
------------------------------
Unidentified Company Representative [172]
------------------------------
Thank you.
------------------------------
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