ThaiBev waves off fresh Sabeco share sale gossip

ThaiBev waves off fresh Sabeco share sale gossip, illustration photo

Rumours resurfaced of ThaiBev looking to sell its 53.6 per cent stake in the subsidiary due in part to slow performance in the wake of the coronavirus crisis and the added damage caused by harsher drink-driving laws brought into the country, rumours which the groups says is “entirely without merit”.

In a Friday bourse filing after market close the group said, “ThaiBev remains fully committed to realising the full potential of its core businesses in Vietnam including Sabeco.”

In December the Ministry of Industry and Trade also had to extinguish reports that ThaiBev was seeking buyers for Sabeco shares. This time around, ThaiBev is witnessing second quarter net profit decline of 14.5 per cent on-year to 4.95 billion Thai baht ($155 million), amid what it called a “challenging business environment” according to its filling.

Neo Gim Siong Bennett, general director of Sabeco told VIR, “The government’s effective actions to contain COVID-19 have helped put the country’s economy in a great position to recover faster, and we believe that this bodes well also for our industry and our company.”

Bennett acknowledged that the pandemic has altered consumption habits. “We see off-premise as potentially becoming the new norm. It has also accelerated people’s move towards online shopping and home delivery,” he added.

In 2017, ThaiBev, owned by Bangkok-based billionaire Charoen Sirivadhanabhakdi and best known for beer brand Chang, acquired 343.62 million shares, equivalent to 53.59 per cent of Sabeco, at the unit price of VND320,000 (nearly $14). ThaiBev spent $4.78 billion on the deal; however, only two years afterwards the company saw nearly half of its investment in the Vietnamese brewer eroded amidst the COVID-19 pandemic and the strict regulations of Decree No.100/2019/ND-CP outlining sanctions for drink-driving, which took effect at the start of 2020.

Last year ThaiBev announced its desire to expand in Vietnam, saying in a Thai newswire that some of the investment budget in 2020 will be set aside for Sabeco to reduce debt and financial costs.

In Vietnam the dual pressures are likely to brown away Sabeco profits from last year. In 2019 it recorded total net revenue of VND37.89 trillion ($1.65 billion) and after-tax profit and minority interests of VND5.1 trillion ($221.74 million). But 2020 is set to be a whole other challenge for the brewer and others like it, with Sabeco’s net sales reducing 47 per cent on-year in the first quarter.

Bao Viet Securities (BVSC) predicted that 2020 would be a challenging year for Sabeco and others as the two main sources of headwinds this year in the new decree and the coronavirus outbreak will continue to slow down beer and alcohol consumption in Vietnam for the foreseeable future. BVSC has drawn up five scenarios for business results in 2020, but revenue will likely decrease.

According to the brokerage firm, beer sales volumes for Sabeco in the year may decrease by 20-25 per cent, with the beer selling price dropping 5-10 per cent due to supply-demand regulations of the market.

Even after the COVID-19 pandemic begins to subside in the region, beer groups across the country and beyond will continue to face difficulties as citizens take on new drinking trends.