Saigon Beer-Alcohol-Beverave Corporation (Sabeco) is targeting a lower post-tax profit in 2018 due to the increase of production costs and stronger competitiveness in the industry.

Its management board said at the company’s annual shareholder meeting on Saturday that it had cut its projected post-tax profit by 19 per cent year on year to VND4 trillion (US$178 million) in 2018.

Its total revenue is forecast at VND36 trillion in 2018, up 2.4 per cent from 2017, and a 35 per cent dividend payout, level to the previous year.

In 2017, the company recorded VND35 trillion in total revenue and VND4.95 trillion in post-tax profit. The 2017 figures increased by 11.2 per cent and 9.6 per cent year on year, respectively.

This was the first annual shareholder meeting after the Thai beer firm ThaiBev via its Vietnamese legal entity had spent around $5 billion to purchase 53 per cent of capital in Sabeco at the end of last year.

Sabeco’s management board said the domestic market was going to be tough in 2018 as competition among brewers in Viet Nam rises. Meanwhile, production cost was estimated to grow as input material prices were expected to increase due to bad weather conditions and seasonal changes.

In addition, alcohol and beer products have been affected by a 5 per cent increase in special consumption tax from the beginning of this year. The new rates for alcohol products range from 35 per cent to 65 per cent and the rate for beer products is 65 per cent.

Sabeco has also not kept up with developing high-end products to meet the growing demand of young customers whose income keeps rising.

However, there are also advantages for Sabeco and the beer industry in 2018. According to studies of international organisations, Viet Nam is among rapidly developing economies with increasing per capita income, fast urbanisation and young population that accounts for 60 per cent of the country’s total.

According to Sabeco’s management board, those will be the factors that are benefiting the local industry to grow strongly in coming years.

At the moment, Viet Nam ranks among top 10 countries with the largest beer production in the world, top among ASEAN countries with the highest consumption and ranks third in Asia in terms of per capita consumption with around 43 litres a year. With an annual growth rate of 5 per cent, Viet Nam’s beer market will attract more and more foreign brewers from overseas, Sabeco said.

Sabeco chairman Koh Poh Tiong told the meeting this year the company would increase its advertising to improve its competition.

Koh Poh Tiong became the chairman of Sabeco in April 2018.

Sabeco debuted on the HCM Stock Exchange with code SAB on December 6, 2016 at VND128,280 ($5.7) per share. Its share price rose to the highest of VND334,460 per share on November 29, 2017 but have fallen 40 per cent since then to end last week at VND200,000 per share. – VNS