14 November 2008

Strong Fundamentals of Asia Pacific Breweries Drive Robust Revenue and PBIT Growth for the Group

Asia Pacific Breweries Ltd (APB) today reported another year of strong revenue and PBIT growth for FY2008.

As compared to FY2007, Group PBIT before exceptional items grew 9% or S$22.6 million to S$277.7 million. Excluding translation differences, gestation losses, non-recurring items and an impairment charge of S$19.1 million to write-down APB's share of the Heineken-APB (China) Pte Ltd (HAPBC) investment in Kingway Brewery Holdings Limited (Kingway), PBIT grew organically by 25%.

Attributable net profit before exceptional items (APBE) at S$131.9 million showed a marginal fall of S$0.6 million or 0.5% versus last year. Excluding translation differences, gestation losses, non-recurring items and the impairment charge to write down APB's share of the HAPBC investment in Kingway, APBE increased organically by 26%.

Attributable Net Profit (ANP) slid 7% to $123.47 million as compared to $133 million the year before.

Group revenue for the year increased 12% to almost S$2 billion; a testimony to strong demand for the Group's beers in the region.

The earnings per share (before exceptional items) amounted to 51.1 cents compared with 51.3 cents in the previous year.

Directors have recommended a final net dividend of 18 cents per share, which together with an interim dividend of 14 cents per share, brings total net dividend for the year to 32 cents per share. This final dividend, if approved by shareholders, will be paid on 10 February 2009.

As at 30 September 2008, net asset value per share rose 2 cents to S$3.71 as compared to S$3.69 the previous year.

Commenting on the results, Mr Roland Pirmez, who assumed the position of Chief Executive Officer of APB on 1 October 2008, said, "APB has once again delivered strong growth in revenue and PBIT in an environment fraught with stiff competition, rising inflation and fluctuating currencies. PBIT and APBE grew organically by 25% and 26% respectively. These demonstrate our robust fundamentals and re-affirm the strength of our valued brands such as Tiger and Heineken as well as our strategic approach in each market. IndoChina (i.e. Cambodia, Laos and Vietnam) retains its top spot as the Group's best performing region, reporting a volume gain of 14% and a PBIT increase of 16% as compared to last year. The region is APB's largest profit contributor, accounting for 51% of APB's total PBIT."

"Papua New Guinea and Singapore which currently account for 22% and 20% respectively of APB's PBIT, had a strong showing each. During the year, Papua New Guinea saw its PBIT surge 35% while sales volume grew 10%. The better performance was attributable to improved profit margins arising from price adjustments made possible by the popularity of the brands that we offer there. Meanwhile, Singapore reported a 20% increase in PBIT, attributable to a 6% volume increase led by higher export and contract brew volume as well as improved domestic sales."

New Zealand which contributes 18% to the Group's PBIT, turned in an organic PBIT gain of 2%, despite intense competition and the flat beer market there. Malaysia, too, did well with a PBIT and volume gain of 7% and 9% respectively. A new contributor to Group PBIT, the new operation in Mongolia reported a maiden profit of S$0.7 million, driven by a two-fold increase in volume.

Mr Pirmez elaborated, "The next few years will be challenging. The Asian beer market, long considered a region of robust growth, will be facing its share of challenges as several Asian economies have already entered a recession. To ride through these difficult times, APB will adopt a multi-pronged approach:

(1) Exploit our successful regionalisation programme undertaken since the early 1990s and capitalise on our regional presence across 12 Asian countries to further unlock shareholder value

(2) Tap on our robust network of 30 breweries and further improve long term operating profit

(3) Refine our marketing expertise and distribution network in bringing our brands into emerging Asian markets

(4) Continue to expand Tiger's geographical footprint; our flagship beer is now brewed in 11 countries and available in more than 60 countries worldwide

(5) Reinforce Heineken's widely-recognised status as a winning global premium brand

(6) Market our portfolio of 40 beer brands to cater to every drinking occasion

Operations Review

Indochina (Vietnam, Cambodia and Laos)
Riding on its momentum, the region registered robust volume and PBIT gains of 14% and 16% respectively. Excluding gestation loss from Laos, translation losses arising from the weaker US dollar and Vietnamese Dong and a reinvestment credit received last year, PBIT would have grown by 35%.

Attributing to the achievements in the region were the robust distribution; as well as the successful brand-led strategy and portfolio optimisation which have further boosted the demand for APB's beers in Cambodia and Vietnam. Meanwhile, the commissioning of the new brewery in Laos in March this year completed the Group's footprint in high-growth IndoChina. Leveraging its expertise in beer brewing and marketing, the brewer seeks to grow the Tiger brand and establish a stronger position in the market.

Papua New Guinea (PNG)
PNG registered a 35% increase in PBIT, owing to a 10% rise in sales volume and improved margins from price adjustments.

Concerted efforts made to optimise production and drive sales of local favourites such as SP Lager and SP Export have succeeded in driving up consumer demand. During the year, a new mid-strength lager (3.5% alcohol by volume) called SP Gold and a range of locally produced and imported alcoholic beverages were introduced in PNG to widen the range of our product offerings there.

Singapore
Singapore performed well with 20% growth in PBIT. This was attributable to favourable sales mix and an overall volume gain of 6% in export, contract brew and domestic sales.

Domestic volume increased as a result of the higher demand for Tiger and Heineken, driven by the active and innovative marketing activities executed in the market.

Export volume grew 3%, owing to the robust global distribution network and the on-going marketing focus to enhance the equity of Tiger globally.

New Zealand (NZ)
Volume went up 1%. However, PBIT fell marginally by 1% mainly due to the devaluation of the New Zealand dollar. Excluding translation loss arising from a 3% decline in the New Zealand dollar, PBIT grew organically by 2%.

The brands Tiger, Heineken, Monteith's and Tui continued to enjoy popularity despite intense competition and the flat beer market there. Ready-To-Drink brands such as Barrel 51 and Fuse also recorded double-digit volume growth during the year.

Malaysia
Malaysia's PBIT increased 7% on the back of a 9% volume increase. The increased volumes of Tiger, Heineken and Anchor reaffirmed their standings as choice brands there.

Thailand
Volume grew 1% but PBIT dipped marginally to $3.9 million. During the year, Tiger registered marginal growth in volume while local brand Cheers recorded double digit growth amidst the challenges of intense competition and regulatory restrictions on consumption and alcoholic advertising. To sustain a good rapport with consumers, innovative consumer programmes were developed to further boost brand awareness and engage drinkers.

Mongolia
Since the opening of the brewery in June 2007, Mongolia achieved a small maiden profit of S$0.7 million for the year, driven by a two-fold increase in volume. It currently brews the increasingly popular Tiger and Sengur, a local beer.

South Asia (India, Sri Lanka)
Volume for South Asia increased 67%. Owing to investments in brand launches in Aurangabad (Maharashtra, India) and a gestation loss from the greenfield brewery in Hyderabad (Andhra Pradesh, India) which commenced commercial operations in January 2008, the region recorded a loss of S$12 million.

Locally-brewed Tiger was launched in Maharashtra, India in April 2008. Strong beers (i.e. beers with an alcohol content of more than 5%) Baron's Strong Brew and Cannon 10000 have been positioned to capture a slice of the strong beer segment which makes up about two-thirds of the Indian beer market.

Sri Lanka, too, saw volume growth, mainly attributable to concerted sales and marketing efforts. The operation also launched Anchor in May 2008 to further enhance its brand offerings.

China
Volume fell 16% due mainly to intense competition and unfavourable weather conditions. Losses stood at S$29.7 million and this was attributable to the impairment charge to write down APB's share of the HAPBC investment in Kingway, lower volumes and increases in raw material prices. Excluding the impairment charge of S$19.1 million, losses for the year were S$10.6 million.

Newsroom 2008 listing

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