SABECO (SAB) results brewing up success

The return of international tourism and stronger consumer demand, as well as enhanced production and cost savings, has helped Saigon Beer Alcohol Beverage Corporation, known as SABECO, post successful results for its second quarter.

 

According to SABECO, its consolidated financial statement for the second quarter saw an increase of 67 per cent in after-tax profit, which reached $78 million.

SConsumers stuck inside for many months last year want to spend more on a good time this year

At the end of the first six months of the year, SABECO recorded revenues of VND16.3 trillion ($708.7 million), up 24.7 per cent over the same period; and profit after tax reached VND3 trillion ($130.4 million), up 47.2 per cent on-year. In which, the gross profit margin in the period reached 32.3 per cent, the highest since 2016.

SABECO explained in its filing to the stock market that in the first half of 2022, net sales and profits have improved and are higher than last year as the country emerged from lockdowns and various consumer promotion programmes for its brands were unveiled.

“The company has enhanced production efficiency and implemented cost-saving measures that have helped to minimise the impact of the higher input costs,” the filing added.

SABECO spent plenty of time in the past year upgrading and improving its signature branding

Many member companies also reported a sharp increase in profits, such as Saigon - Mien Trung Beer Joint Stock company and Saigon - Hanoi Beer Coporation. Some even saw doubled profits thanks to product selling prices and increased consumption.

SSI Research said SABECO’s gross profit margin remained stable amid inflation, thanks to the company’s signing of long-term purchase contracts for key raw materials and prices. Average sales have increased by nearly 10 per cent in the past three quarters.

Leif D.Schneider, vice chairman of the Legal Sector Committee at the European Chamber of Commerce in Vietnam remarked at his post, “This makes SABECO the next great example of a successful inbound acquisition of a Vietnamese enterprise by a foreign investor. These types of inbound deals have seen a significant uptick over the past two to three years.”

Thailand’s largest beverage company bought a 54 per cent stake in SABECO five years ago.

Since then, the group has implemented a new marketing strategy with the goal of spending more effectively on advertising and promotions. This included the launch of a Lunar New Year collection in which various product lines like Saigon Lager and Saigon Export featured Vietnamese identity images of all 63 cities and provinces on their packaging.

According to MBS Securities, with the opening of tourism and entertainment activities earlier this year, customers have a buying mentality that could help grow Vietnam’s beer industry.

However, the market may not reach success similar to pre-2019 times until next year. Nevertheless, Euromonitor remains optimistic as it forecasts that the compound annual growth rate of Vietnam’s beer industry for 2021-2026 will reach 10 per cent.

SABECO emphasised that its focus on developing its core segment instead of trying to compete with bigger names in the high-end segment is a wiser strategy, as the popular segment still has the highest sales volume in the Vietnamese market and the group still has an outstanding advantage in terms of brand, production scale, and distribution system in Vietnam compared to rivals such as Habeco and Carlsberg.

For instance, Bia Saigon has been reborn with a new taste, packaging, and positioning to better meet the needs of consumers.

Besides that, SABECO continues to strengthen its sales network through the Circle K system and e-commerce sites such as Tiki, Lazada, and Shopee.

This year, SABECO targeted $1.5 billion in net revenues and $200 million in after-tax profit, an increase of 32 and 17 per cent on-year. Thus far, the group has accomplished around half of its revenue plan and 65 per cent of its profit goal.

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