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Analyst MeetingQ3’19 Financial Performance
14 November 2019
Osotspa Public Company Limited (OSP)
Disclaimer
Statements included or incorporated in these materials that use the word “believes”, “anticipate”, “estimate”, “target”, or “hope”, or that otherwise relate to the objectives, strategies, plans, intentions, beliefs orexpectations or that have been constructed as statements as to future performance or events, are “forward-looking statements” within the meaning that are not guarantees of future performance and involve risksand uncertainties that could cause actual results to differ materially from historical results or those anticipated at the time the forward-looking statements are made. Osotspa Public Company Limited (“OSP” or the“Company”) undertakes no obligation to publicly update or revise any forward-looking statement, whether as result of new information, future events or otherwise. OSP makes no representation and assume noliabilities against whatsoever about the opinion or statements of any analyst or other third party. OSP does not monitor or control the content to third party opinions or statements and does not endorse or acceptany responsibility for the content or the use of any such opinion or statement.
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Financial Performance
3
Q3’19 Financial Highlights – by Segment
4
• CLMV +14.2%
Mainly driven by Myanmar
(+10.1% at constant FX)
• Others +14.9%
Driven by Middle East
• M-150 back to growth since
Q2’19 from strong brand
preposition and sales execution
• Som In Sum + 64.4%
Continued strong growth after
repositioning in 2H’17
• Chalarm - 11.3%
High base CKD last year
• C-Vitt + 37.8%
Maintained no. 1 in functional
drinks with increased capacity
in Q3’19
• Peptein + 31.8%
With Peptein Plus in Feb’19
• BBM + 1.7 %
Mainly driven by NPD
Sweet Almond launched in
May’19
• 12Plus +12.8%
Continue momentum of
cool powder and NPD
whitening plus roll on
• OEM - 6.1%
Growth in OEM – Glass
offsetting with lower sales
on OEM - personal care
• Confectionary + 2.9%
Driven by growth from Ole
+
+
+
Full Year Target
• Net profit* +8.5% YoY
• Net profit margin** at
13.2% vs. 13.1% in Q3’18
• Outstanding GM at 34.6%
improved by 280 bps YoY
from “Fit Fast Firm” project
driving overall costs down
Net Profit*
THB 838M
13.2%
Net Profit Margin**
Remark : * Net Profit attributable to owners of the parent ** Net Profit attributable to owners of the parent to Total Revenue from Sales
9M’19 Financial Highlights – by Segment
5
• M-150 back to growth since
Q2’19 from strong brand
preposition and sales
execution
• Som In Sum + 36.1%
Continued strong growth after
repositioning in 2H’17
• Chalarm + 12.8%
Mainly from CKD
• C-Vitt + 51.0%
Maintained no. 1 in functional
drinks with increased capacity
in Q3’19
• Peptein + 25.3%
With Peptein Plus in Feb’19
• BBM + 5.6 %
Mainly driven by NPD
Sweet Almond launched in
May’19
• 12Plus + 19.3%
Continue momentum of
cool powder and NPD
whitening plus roll on
• OEM - 3.8%
Growth in OEM – Glass
offsetting with lower sales
on OEM - personal care
• Confectionary + 11.3%
Driven by growth from
both Ole and Botan
Net Profit*
THB 2,436M
12.8%
Net Profit Margin**
• Net profit* +9.9% YoY
• Net profit margin** at
12.8% vs. 12.3% in 9M’18
(13.2% if excluding additional
provision for retirement
benefits 96.8 MB)
• Outstanding GM at 34.9%
improved by 320 bps YoY
from “Fit Fast Firm” project
driving overall costs down
• CLMV +9.7%
Mainly driven by Myanmar
(+6.5% at constant FX)
• Others +17.6%
Driven by Middle East
Remark : * Net Profit attributable to owners of the parent ** Net Profit attributable to owners of the parent to Total Revenue from Sales
31.8% 34.6%
31.7%34.9%
Q3'18 Q3'19 9M'18 9M'19
18,452 19,438
9M'18 9M'19
14.0% 16.2% 14.4% 15.3%
5.7%6.8%
5.6%7.1%
Q3'18 Q3'19 9M'18 9M'19
772 838
2,216 2,436
13.1% 13.2% 12.3% 12.8%
-10.0%-9.0%-8.0%-7.0%-6.0%-5.0%-4.0%-3.0%-2.0%-1.0%0.0%1.0%2.0%3.0%4.0%5.0%6.0%7.0%8.0%9.0%10.0%11.0%12.0%13.0%14.0%
0
500
1,000
1,500
2,000
2,500
3,000
Q3'18 Q3'19 9M'18 9M'19
To the owner of the parents
Revenues Gross Margin
SG&A Net Profit
Q3’19 and 9M’19 Financial Highlights
Admin Exp
Selling Exp
⚫ Net Profit Margin
6,063 6,532
Q3'18 Q3'19
⚫ Other Income
(19.6%)(23.1%)
6
(20.1%)(22.3%)
Net Sales Analysis: Thai Beverages
+12.8%SALES GROWTH YOY
Chalarm Black Galingale turnaround Chalarm brand
Continued activation and promotion campaign nationwide
37.4%MARKET SHARE
+36.1%SALES GROWTH YOY
Focus on below-the-line activities
7
Continued promotional campaign through LINE Official Account for M-Point collection campaign 2019
Net Sales Analysis: Thai Beverages
25.5%MARKET SHARE 4.8%
MARKET SHARE
Strengthen communication campaign and below-the-line activities
8
Launched promotional campaign, received “Most Top Rising Brand 2019” and ensured adequate supply
Continued activation campaign with new packaging to support “Fit Fast Firm”
+19.3%SALES GROWTH YOY
Net Sales Analysis: Thai Personal Care
Strengthened brand together with NPD Twelve Plus Whitening Plus Roll On and Twelve Plus Perfume Card
+5.6%SALES GROWTH YOY
9
Continued promotional campaign to support all product ranges
Net Sales Analysis: International SalesAt constant FX
10
Myanmar - Instant win and Dance with Shark digital campaign reaching 50 million posts
Laos & Cambodia - Instant win campaign and on-the-ground activation
Balance Sheet (as of 30 Sep 2019)
11
Key Changes in Balance Sheet Items
• Total assets: Decreased by THB 547mn from: THB 927mn decrease in cash and cash equivalents: THB 2,257mn decrease in current investments (in private funds): THB 256mn decrease in inventories: THB 1,739mn increase in PPE from SGA2
• Total liabilities: Increased by 211mn from higher trade and other payables
• Shareholders’ equity: Decreased by THB 758mn, where profit for the period was offset by to dividend payment of THB 3,124mn for 2018 and 1H’2019 performance
ASSETS As at As at
(THB million) 30-Sep-19 31-Dec-18
Cash and cash equivalents 3,559 4,486
Current investments 1,243 3,500
Trade and other receivables 3,239 3,030
Inventories 1,301 1,557
Other current assets 78 67
Total Current Asset 9,420 12,640
Net PP&E 8,257 6,518
Long term investments 3,247 2,608
Other assets 1,985 1,690
Total Non-Current Assets 13,489 10,816
Total Assets 22,909 23,456
LIABILITIES and EQUITIES As at As at
(THB million) 30-Sep-19 31-Dec-18
Trade and Other Payables 4,479 4,131
Other Liabilities 885 1,022
Total Liabilities 5,364 5,153
Issued and Paid-Up Share Capital 3,004 3,004
Share Premium 11,848 11,848
Retained Earnigs 2,611 3,298
Surplus on Business Combination Under Common Control 353 353
Other Components of SE (460) (415)
Non-Controlling Interest 189 215
Total Shareholders' Equity 17,545 18,303
Total Liabilities and Shareholders' Equity 22,909 23,456
Cash Flow Movement
Operating CF: THB 2,943mn cash inflow from
1) THB 2,459mn Net profit
2) THB 1,098mn Non-cash transactions (depreciation and provision)
3) THB 236mn change in working capital
4) THB -850mn tax paid
Investing CF: THB 675mn cash outflow from
1) THB 2,804mn PPE acquisition
2) THB -1,853mn Decrease in investment in private fund
Financing CF: THB 3,195mn cash outflow from
1) THB -3,124mn Total dividend payment
Cash Flows and Key Ratios
12
Cash Flow (as at 30 Sep 2019) Key Financial Ratios
Notes: ROE and ROA are annualized
Units: THB millionQ3'19 Q3'18 9M'19 9M'18
Liquidity Ratios
Current ratio (times) 2.0 0.6 2.0 0.6
Number of days of inventory 29 38 31 37
Collection period (days) 44 44 45 44
Accounts payable (days) 43 45 44 42
Profitability Ratios
Gross profit margin (%) 34.6 31.8 34.9 31.7
EBITDA margin (%) 19.7 20.7 19.5 19.7
Net profit margin for the period (%) 13.3 13.4 12.9 12.6
Net profit margin attributable to owners of the parent (%)
13.2 13.1 12.8 12.3
Return on equity (%) - trailing 28.7 53.0 28.7 53.0
Return on assets (%) - trailing 17.0 16.8 17.0 16.8
Other Ratios
Total debt to equity (times) 0.3 2.0 0.3 2.0
4,486
4,486
6,754
3,559
3,559
2,943
(675)
(3,195)
Beginning cash andcash equivalents
(31 Dec 2018)
Net cash used inoperating activities
Net cash used ininvesting activities
Net cash used infinancing activities
Ending cash andcash equivalents(30 Sep 2019)
Core Strategy Updates
Production Efficiency – New facilities
• New glass factory (SGA2)
• New factory in Myanmar
• New cullet treatment lines
• Total Productive Maintenance (Increase capacity without major investment in new production line)
Business Update: Core Strategies Progress Update
14
Strengthen domestic presence in broader non-alc. beverages and expand PC
Leverage market-leading position in Thailand to sustain and expand to overseas markets
Focus on cost-efficiency and margin enhancement through NRM principle
Maintain Energy Drink Market Share (Value) : 9M’19
53.5%
Grow Functional Drink Market Share 9M’18 → 9M’19
29.9%→33.7%
Personal Care Sales Growth in 9M’19 :
+10.7%Total International Sales Growth for 9M’19 (at constant FX):
+10.4%
International PC Sales Growth For 9M’19 (at constant FX):
+16.3%Fit Fast Firm
9M’19 GM
= 34.6%+280bps YoY
Continue impact in 9M’19:
Bev International Sales Growth for 9M’19 (at constant FX):
+10.0%
2019 “Fit Fast Firm” Project►Reap benefits from projects implemented in 2018► Increase efficiency through new cullet treatment lines ►Harmonize packaging specification►New lighter weight bottles ►Optimize product formulation
OEM Bottle sales – Improve margin overall beverage by sharing fixed costs
+20%
1H'18 1H'19 2H'18 2H'19 ( E )
+1%
Business Updates
• Invest in Channel – Vending Machine Business TH • Increase R&D Capabilities - Osotspa Innovation Center (OIC)•Complete new Glass Factory under BOI – SGA2 (Aug19)•Complete new Talcum Plant (4Q19)•Complete Myanmar New Plant, RTM, Portfolio strategy (4Q19)•Expand to new country - Vietnam• Invest in Glass Factories in Myanmar•Progress cost saving program for margin expansion and cost efficiencies through “Fit Fast Firm”
•Technology: Robotics for accounting process •Distribution and Warehouse (2020)•Next step Net Revenue Management (2020)
• Extend portfolio – Babi Mild Sweet Almond• Revitalize using idol marketing – Twelve Plus• Capture Premium Segment – Organik by Babi Mild• Enter Facial and Skincare Category - Plantstory• Adopt New Distribution Channel – E-commerce• Embrace New trend and New packaging – Olé Boost
and Olé Mini Sugar Free
• Grow Herbal Variant – Chalarm Black Galingale• Extend Segmentation – Som In-Sum• Strengthen Consumer Base - M-Point Loyalty Program• Target New Trend – Shark Natural Caffeine / No Sugar• Start New Channel – Osotspa Delivery
• Continue Growth – C-Vitt Capacity Expansion• Expand Distribution Channel – C-Vitt Tetra Pack• Add New Variant – Peptein Plus• Respond New Healthy Trend – Vplus• New Benefits - Slimma
2019 Highlights: To achieve mid-single digit growth and pursue margin accretive initiatives
Energy Drinks Functional Drinks
Strategic MovesPersonal Care and Others
16
Product
Category Implementation Outcomes
Energy Drinks Grow and premiumize herbal variant
Strengthen consumer base
Q3’18 +19%Q3’17 +336%
Start Q3’19
%Sales growth (MAT*) compared to before implementation
1.2
33.9
Y2017 Y2018 9M2019
OSP’s Market share Herbal Segment
108%
146% 54%
Y2016 Y2017 Y2018 9M2019
Herbal Segment’s Revenue Growth (YoY)
Start Q3’19
3.3 Million UsersAfter 4 months launched
Growing proximity channels - Get closer to the consumer
100 ml10 Baht
OSP’s Revenue Growth in Vending Machine and E-commerce Channel (YoY)
23% 75%
Y2017 Y2018 9M2019
17
Product
Q1’19 +23%
Category Implementation Outcomes
Start Q3’19
Q3’18 +187%
Start Q3’19
Functional Drinks
Personal Care
%Sales growth (MAT*) compared to before implementation Capacity and distribution expansion
New healthy trend and benefits
Extend portfolio and capturing premium segment
Enter facial and skincare category
Add new variant %Sales growth (MAT*) compared to before implementation
Market share uplift for overall brands
Distribute through e-commerce, image stores and some MT channels
Market
Share 33.7% 36.1%
Start Q2’19 Q3’19
Market
Share 18.2% 19.9%
Start Q2’19 Q3’19
18
Strategic
Moves
• Cullet sourcing strategy
• Product reformulation
• Cullet treatment lines and recycle center
• Lighter weight bottle
• Net revenue management/Total production management
• Packaging harmonization
• Robotics for accounting process
Future Plan
• Continued Product Reformulation
• Further Packaging Harmonization
• Warehouse and Distribution Optimization
• Completed:
• Osotspa Innovation Center operated in Q3’19
• SGA2 equipped with state-of-the-art technology;
increased overall capacity 10 – 15%
• Talcum Plant completed in Q4’19
• Vending Machine JV in Q3’19
• Vietnam Entry in Q4’19
• On-Going:
• Thilawa (Myanmar) factory completed end of
2019; full commercial run Q1’2020; capturing
manufacturing margin and using portfolio strategy
• Myanmar Glass Production Facility (2021)
• Warehouse and Distribution (2020)
Initiatives Implementation Outcomes
GPM improved meaningfully
Start Q4’17 Q3’19
Q4’17 32.7% 34.6%Gross Profit Margin
Cost Saving Program for
Margin Expansion
Osotspa Innovation Center
Glass Factory (SGA2)
New Talcum Plant
Vending Machine Business
Vietnam Entry
Thilawa Beverage Factory
Myanmar Glass Factory
Warehouse and Distribution
19
+
M-150 New Products and Campaign
20
21
Functional Drinks - New Product
22
Personal Care - New Product Launch
23
Personal Care - New Product Launch
Vietnam Entry
Business Potential
Investment ▪ Invest USD 1.5million to acquire 60% shares in Osotspa VTA Joint Stock Company, a holding company that will carry out trading business of energy drink products in Vietnam
Partnership
Thai Market Leader in Energy Drink and Functional Drink
Strong Marketing and Sales
Local Distributor of Beverage Products Strong Distribution Network
Strong Local Insights in Vietnam
+
24
▪ Large population with high consumer spending
▪ Favorable market growth▪ Energy Drink per capital consumption still low, compared to Thailand
Glass Manufacturing Business
26
Add TextSimple PowerPoint
Add TextSimple PowerPoint
Add TextSimple PowerPoint
Use clean cullet and other rawmaterials to manufacture glasscontainers for both energy drinks,functional drinks and OEM
Glass Production Factory
Sort defects or returned goods to be ready for recycle process
Recycle Center Treat dirty cullet from recyclecenter to yield cleaner rawmaterials at cheaper cost
Cullet Treatment Factory
1
Production Process
1
2
3
Recycle Center
Defects/Returned Goods
Sorting Ready to be Recycled
To develop and highly utilize the waste to support the whole supply chain of glass manufacturing businessPurpose
MethodDefects/Returned goods are gathered and sorted into separate parts, including liquid, paper, glass, plastic, and aluminum to be ready for recycle process
Dirty cullet to be treated
Sold to third parties
27
Glass Factory (SGA2), Ayutthaya
29
Commercially Operation October, 2019
CAPEX THB1,800 million
BOI Privilege
Exemption on Raw material and machinery import tax duty
100% exemption for 8 years
50% exemption for another 3 years
General Information
29
Self-adjustment production
Hot-end inspection
Maximize OEM to produce at full
capacity and maximize margin
High Flexibility
30
Machine Integration
Robotic Process
Intelligent System
Technology 4.0 Applied
Less manpower required
compared to the typical SGA
factory
Less Manpower Required
Enabled lighter-weight bottles
capabilities, resulting in further
cost reduction (logistic costs and
3-5% conversion cost)
Lighter-weight Bottles
Improved total Osotspa’s capacity
by 10-15%
Capacity Enhancement
M2M (Machine to Machine)
Autonomous Process
Big Data Analytics
Capabilities of the New Glass Production Factory (SGA2)
Glass Bottle Manufacturing in Myanmar
31
Business Outlook
Investment
PartnershipStrong Expertise in Glass Bottle Manufacturing
+
31
▪ Only Glass Bottle Factory in Myanmar▪ Strong demand from growing liquor and beverage industries▪ Potential for OSP own use▪ Offer Competitive pricing as alternative to imported products▪ Contract 50+10+10 years▪ Going for Sustainable packaging
Myanmar Local Partner
Approx. USD 40 million or THB 1,213.6 milllion
49%
Strong Local Insights with Potential Customers
51%
Project Cost
Invested at the amount not exceeding USD 8 million in Myanmar Golden Eagle Company Limited (MGE) and Myanmar Golden Glass Company Limited (MGG) for a total of 51% ownership interest with expected commercial run in 2021
&
