07 May 2009

APB Posts 9.6% Attributable Net Profit Gain For H1 2009

Despite operating amidst challenging trading conditions across almost all its markets, Asia Pacific Breweries Ltd (APB) today announced a 9.6% increase in attributable net profit (after exceptional items) to S$94.5 million for the six months ended 31 March 2009. The improvement is largely due to a one-time gain of S$3.5 million from the sale of Liquorland Limited, a chain of liquor retail stores in New Zealand.

Profit Before Interest, Taxation & Exceptional Item (PBIT) gained 2.2% or S$3.7 million to S$172.7 million as compared to the corresponding period last year. Excluding translation difference and gestation losses*, PBIT rose organically by 6% to S$184.4 million.

Attributable Net Profit before Exceptional Items (APBE), at S$91 million, is comparable with that of the corresponding period last year. Excluding translation difference and gestation losses*, APBE grew organically by 7% to S$100.9 million.

Group revenue for the same period increased 1% to slightly more than S$1 billion.

Earnings per share before exceptional items rose from 35 cents to 35.3 cents. Net asset value per share gained 15 cents to S$3.89 while net tangible assets per share increased from S$2.96 to S$3.04 when compared to March last year.

The Directors have recommended an interim dividend of 14 cents per share, tax exempt (one-tier), to be paid on 12 June 2009.

Mr Roland Pirmez, Chief Executive Officer, APB said, “As expected, market conditions for the first half of 2009 were challenging and the beer sector remains highly competitive in most of our operating markets. Translation losses have also adversely affected profit levels during this period.”

“However, notwithstanding the above, our markets namely Indochina, Papua New Guinea and Singapore recorded improved revenue and profit levels as compared to the same period last year. Papua New Guinea continues to do well with revenue and PBIT increasing 25% and 35% to S$134 million and S$37 million respectively. In Singapore, while revenue edged up only 4% to S$262 million, PBIT improved 33% to S$39 million. Indochina, traditionally our best performing market, saw revenue increase a respectable 6% to S$442 million while profit performed slightly better with an 8% increase to S$95 million,” he elaborated.

Malaysia’s PBIT grew 2% due to a small increase in volume. Neighbouring Thailand showed negligible PBIT growth with political unrest and regulatory restrictions on the consumption and advertising of alcoholic products contributing to the difficult market conditions there.

New Zealand witnessed a sharp reduction of 24% in revenue and 57% in PBIT to S$192 million and S$16 million respectively. The main reasons for the decline were higher costs of operation, an intensely competitive environment and translation losses brought about by the weaker New Zealand dollar. Trading conditions are not expected to improve in the short term.

Our breweries in Mongolia and South Asia (India and Sri Lanka), continue to register strong revenue growth of 28% and 18% to reach S$7 million and S$23 million respectively. This is offset by an unrealised exchange loss of S$9m on US currency loans for Mongolia while increased marketing investment in promotional spend as well as gestation losses for South Asia resulted in a loss of S$6 million. In China, intense competition and higher commercial spend deepened losses in this traditionally difficult market to almost S$10 million.

With uncertainty in the global economy impacting the markets in which we operate, the group expects trading conditions to continue to be challenging, particularly in New Zealand. APB will continue to optimise its brand portfolio to compete effectively amidst the difficult economic environment and capitalise on the varied consumer needs and trends as well as tightening control on operating costs.

“Our balance sheet and our business fundamentals remain strong. We remain committed to our long-term vision of investing in the region to support future growth and improve our competitiveness. A good example is a recently completed project in Danang, Vietnam which raised production capacity by 25%. The investment is aligned with our strategy to increase our capacity there to equip our business for the next phase of growth,” elaborated Mr Pirmez.

Last month, APB launched its first S$1 billion medium term note programme to provide flexibility in financing its investments, general working capital, capital expenditure requirements and for refinancing any existing borrowings.

Operations Review (YTD 6 Months)

Papua New Guinea
PBIT increased 35% due to a 6% volume increase, better margins from price increases and appreciation of the Kina. Excluding the translation gain, PBIT grew 23%.

Singapore
PBIT rose 33% due mainly to volume growth, improved margins from price increases and lower overheads. Overall volume grew 5% with export and domestic sales outperforming last year.

Indochina (Cambodia, Laos, Vietnam)
PBIT for the region grew 8% and this was attributable to price increases and lower spend in marketing activities. Volume for the region dipped 4% in light of the continuing weak economic conditions. Without factoring in the gestation loss from Laos and translation loss arising mainly from the weaker Vietnamese Dong, PBIT would have grown 12%.

Malaysia
PBIT grew 2% as a result of a 3% rise in volume.

Thailand
PBIT was comparable to the same period last year due to a lower expenditure in marketing activities. Volume fell 14% due to the prevailing market conditions of political unrest and regulatory restrictions on the consumption and advertising of alcoholic products.

New Zealand
Volume grew marginally, driven by soft drinks and ready-to-drink (RTD). As a result of falling consumption, deteriorating New Zealand dollar, lower margins from fierce competition and higher packaging material costs, PBIT declined by 57%. Excluding the translation loss arising from the weakened New Zealand dollar, PBIT fell 42%. Trading conditions are not expected to improve in the short term.

South Asia (India and Sri Lanka)
Volume for South Asia increased 32%. Loss at S$6.1 million was attributable mainly to higher expenditure in marketing activities in Aurangabad (Maharashtra, India) and gestation loss from the greenfield brewery in Hyderabad (Andhra Pradesh, India) which commenced commercial operations in January 2008.

Mongolia
Volume grew 14%. However, the loss at S$9.1 million was attributable to unrealised foreign exchange losses from US dollar loans, arising from the weakening Mongolia Tugrik against the US dollar. Excluding the impact from the foreign exchange losses, operating losses were reduced by 77% to S$0.3 million.

China
As the agreement has lapsed, Heineken-APB (China) Pte Ltd is in discussion with Nantong Fuhao Alcohol Industry Co Ltd to negotiate new agreements on the sale of Jiangsu Dafuhao Breweries Co. Ltd (DFH). DFH’s performance from June 08 to March 09 had been included in this quarter’s results. However, the inclusion of DFH’s performance has no material impact to the group’s results.

China operations recorded a loss of S$9.7 million due to intense competition and higher commercial expenditure.

Corporate Office
Compared to the same period last year, corporate office registered a surplus due mainly to higher royalty income, foreign exchange gain, lower overheads and lower expenditure in marketing activities.

*gestation losses refers to the 1st 3 years’ results from greenfield breweries in Laos, China (Guangzhou, Guangdong) and India (Hyderabad, Andhra Pradesh).

Newsroom 2009 listing

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