New management targets lower profits for Vietnam’s top beer maker
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Sabeco targets profits of VND4 trillion ($173 million) this year on revenues of VND36.09 trillion ($1.58 billion), a 2.4 percent rise over last year.
Newly appointed chairman Koh Poh Tiong explained to shareholders that spending on brand promotion would be higher this year.
He said rising cost of raw materials due to bad harvests across the world and the new special consumption tax, up to 60 percent from 50 percent, effective this year, would also hit profits.
Last year Sabeco produced 1.8 billion liters of beer and reported sales of VND35.22 trillion ($1.54 billion), up 11.2 per cent year-on-year, and net profit of VND4.95 trillion ($216 million), up 9.6 percent.
This is Sabeco’s first annual general meeting since the TCC Group, led by Thai tycoon Charoen Sirivadhanabhakdi, paid Vietnam’s Ministry of Industry and Trade (MOIT) VND110 trillion ($4.89 billion) for a 53.59 percent stake late last year.
The management said that thanks to Sabeco’s collaboration with Thai Beverage it would be able to get raw materials cheaper in future.
The firm also hopes to capitalize on ThaiBev’s experience in public relations, logistics and working with global PR agencies to promote its brand internationally.
The management said Sabeco is exploring opportunities to expand capacity.
Shareholders heard that the firm faced difficulties in competing with strong foreign brands, and so plans to further develop its distribution networks, especially in HCMC.
Asked about the possibility that the Sabeco brand could disappear since “it is in Thai hands” now, especially if MOIT divests further, he said TCC Group plans to develop this brand since it had spent an enormous $4.89 billion to buy it.Koh said Sabeco has a 40 percent market share.
Last April the ministry had called on Sabeco to pay VND2.5 trillion ($111 million) in undistributed profits to the government, the major shareholder with an 89.6 per cent stake as of December 31, 2016.
“He said rising cost of raw materials due to bad harvests across the world and the new special consumption tax, up to 60 percent from 50 percent, effective this year, would also hit profits.”
Koh told shareholders that since the firm had submitted related documents to the government, he could not give them a more detailed answer.
The AGM approved a new seven-member board for 2018-23 including four representatives of the Thai company – Koh, Michael Chye Hin Feh, Pramoah Phornprapha and Tran Kim Nga.
Of the remaining three, chief accountant Nguyen Tien Dung and Luong Thanh Hai are MOIT’s representatives.
The price of Sabeco (sticker SAB) shares on the Ho Chi Minh stock exchange has plunged since TCC Group’s acquisition.
On July 20 it traded at around VND200,000 ($8.74), giving the company a market value of VND128 trillion ($5.6 billion).
TCC Group had bought Sabeco’s shares at VND320,000 ($13.98).
Koh told shareholders that the price merely reflects supply and demand in the market, while TCC looks at the long term and the firm’s future prospects.
Vietnam is one of the top 10 beer producing countries in the world besides being the top consumer in Southeast Asia and the third largest in Asia with an average of 43 liters per person per year, according to Sabeco’s management.
MOIT figures show that the brewery market growth has been slowing, growing at only around 5 per cent in the last five years compared with 10 per cent 10 years ago.
Last year it grew at 5.6 per cent.
Questions & Answers
Q.What factors are expected to reduce Sabeco's profits this year?
What factors are expected to reduce Sabeco's profits this year?
Higher spending on brand promotion, rising raw material costs due to bad harvests globally, and an increase in the special consumption tax from 50 percent to 60 percent are expected to hit profits. These factors contribute to the targeted lower profits.
Q.How will Sabeco benefit from its collaboration with Thai Beverage?
How will Sabeco benefit from its collaboration with Thai Beverage?
Sabeco expects to obtain raw materials more cheaply in the future. The firm also hopes to use ThaiBev’s experience in public relations, logistics, and working with global PR agencies to promote its brand internationally, aiding expansion.
Q.What was the government's stake in Sabeco as of December 2016, and what was it asked to do?
What was the government's stake in Sabeco as of December 2016, and what was it asked to do?
The government held an 89.6 percent stake in Sabeco as of December 31, 2016. In April, the Ministry of Industry and Trade requested Sabeco to pay VND2.5 trillion in undistributed profits to the government, as a major shareholder.
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