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Can with Bia Saigon Lager (Photo: Pablo Rebolledo on Unsplash)
22 October 2020

Sabeco proves a drag on ThaiBev’s results

Vietnam | It wasn’t covid-19 that has hit Sabeco, the country’s major brewer, hard, but tough drunken-driving penalties, which were introduced in January 2020. Beer consumption dropped 23 percent in the first half of 2020, and is only recovering slowly. It stood at 46 million hl in 2019, up 7 percent from 2018.

Drinking beer is one of Vietnam’s national pastimes. But even popular bars have struggled to fill their seats after the government clamped down on drunken drivers. Inebriated motorcyclists now face a fine of up to USD 350 and can have their license revoked for up to two years.

As reported the news site Nikkei.com, Sabeco saw its beer output decline 30 percent in the first half of this year, and is on track for a 39 percent drop in net profit to 3.25 trillion dong, according to SSI Securities. Sabeco’s share price is down roughly 20 percent from the beginning of the year.

Vietnam is the largest beer market in Southeast Asia. It also ranks third across Asia as a whole, behind China and Japan.

Will the government sell remaining stake in Sabeco?

When the government decided to sell a 54 percent stake in Sabeco, which controls roughly 40 percent of the beer market, it attracted bids from across the world. Thai Beverage (ThaiBev), the producer of Chang beer, won the auction in 2017 for what was then the equivalent of about USD 4.8 billion.

In June this year, the government announced that it would sell its remaining stakes in about 130 companies, including Sabeco, as part of a privatisation drive.

To this effect, the government transferred its remaining 36 percent stake in Sabeco to the State Capital Investment Corporation at the end of August, with plans to unload it by the end of the year. Based on the current stock price, the sale could be priced at USD 1.8 billion, media say.

It isn’t clear if the government will really push ahead with a sale of its stake, given Sabeco’s diminished market capitalisation.

ThaiBev expected to mop up the rest

Singapore-listed ThaiBev is considered the most likely buyer for the Sabeco stake. ThaiBev’s CEO Thapana Sirivadhanabhakdi said recently that he will “keep an eye on all opportunities”.

Already, Sabeco has proven a drag on ThaiBev’s financial results. In the nine months to end of June 2020, ThaiBev’s revenue from beer fell 14.2 percent over the same period last year, while volume sales dropped 15.6 percent to 17 million hl beer. Since late 2019, ThaiBev has repeatedly denied rumours that it is seeking a buyer for its Vietnam business.

“If ThaiBev buys more Sabeco stock, it could end up with greater losses,” an analyst was quoted as saying. The covid-19 pandemic will pass eventually but the penalties on drunken driving will stay.