Thai Beverage Public Company Limited (Y92) Earnings Call Transcript & Summary

[Audio Gap] Half 2025 Results Call. [Operator Instructions] I will now hand over the call to the presenters, Ms. Namfon Aungsutornrungsi, ThaiBev's Head of Investor Relations; and the members of ThaiBev's senior management team. Thank you.

Good evening, ladies and gentlemen, and welcome to Thai Beverage the First Half 2025 ended the 31st of March 2025 Financial Results Conference Call. I am Namfon Aungsutornrungsi, Head of Investor Relations. For the call tonight, I will start with a summary of the results, then we will open the line for Q&A with our management team here. Please note that following the consolidation of F&N in September 2024, which is accounted for as a business combination under common control by the same ultimate controlling shareholder, the group's financial results for the first quarter -- sorry, for the second quarter and the first half ended 31st of March 2024 (sic) [ 2025 ] have been restated for comparison purposes. For the summary of the first half results, the total sales revenue of the group for the first half was THB 177,617 million, an increase of 1% when compared to the same period last year. This was due to an increase in sales revenue of beer business, nonalcoholic beverage and food business, while there was a decrease in sales revenue from spirits business and other business. Net profit, including associated companies was THB 17,769 million, a decrease of 9.2% compared to the same period last year. This was due to a decrease in net profit from spirits, nonalcoholic beverages, food business and others business, partly offset by an increase in net profit from the beer business. ThaiBev's Board of Directors agreed to propose an interim dividend payment of THB 3,770 million or THB 0.15 per share, the same as last year. The company remains committed with our full year dividend policy of not less than 50% of the net profit after deducting of all specified reserves, subject to our investment plans and as the Board of Directors deem appropriate. In the first half 2025, the spirits business generated sales revenue of THB 64,520 million, a decrease of 1.5% year-on-year. This was due to a decrease of 1.9% year-on-year in total sales volume. In addition, higher raw material costs alongside increased brand investment and marketing activities led to a 10.3% year-on-year decline of net profit to THB 11,601 million. The beer business recorded sales revenue amounting to THB 66,201 million in the first half, an increase of 3% year-on-year. This was mainly due to a 7.4% year-on-year increase in total sales volume. The net profit increased by a robust 19% to THB 3,152 million, driven by a decrease in key raw material costs and improvement in production efficiency. The nonalcoholic beverage business recorded a 2.5% year-on-year rise in sales revenue to THB 33,438 million in the first half, supported by a 4.1% year-on-year increase in total sales volume, driven by the drinking water and carbonated soft drink. Despite this, net profit decreased by 11.3% year-on-year to THB 3,114 million due to a lower share of profit from associated company and higher tax expenses from expired tax incentive. In the first half of 2025, the food business registered THB 11,145 million in sales revenue, an increase of 0.7% year-on-year. Despite this, net profit fell by 61% year-on-year to THB 124 million, weighed down by a rise in raw material costs, labor and marketing expenses and increased depreciation expense from restaurant expansion. In the first half of 2025, the group's others business registered a decline in sales revenue of 4.8% year-on-year to THB 2,438 million. This was mainly due to a decrease from licensing income impact from depreciation of Thai baht against Singapore dollar, partly offset by an increase in education sales in this year. The net loss was THB 222 million due to no profit sharing from FPL in this year. That's a summary of the first half results. We now open for the call to any questions on our results. Operator, please help open the line for Q&A.

[Operator Instructions] Our first question comes from the line of Llelleythan Tan from UOB Kay Hian Research.

Can everyone hear me?

Llelleythan, we can hear you.

So I have 3 questions. So I'll start off with the spirits. So I see that the cost of -- increase was -- increase in -- for the second quarter, there was an increase in raw material costs for the second quarter. I see in the explanation. But I remember from the last meeting we had 6 months ago, it was stated that the crop yield for this year is like 10% to 20% lower than as compared to -- sorry, the crop cost is 10% to 20% lower than the previous year. So that means there will be lower raw material costs. So have we actually seen that coming through yet? Or we will start seeing that come through in the third quarter? Then for -- and then move on to my second question, the beer business. So I can see that it was stated as challenging market conditions overseas. So I'm assuming that's in Vietnam. So as based on the past results of Sabeco, volumes usually depressed when market economy is not so good. So given that with these tariffs and Vietnam facing some larger tariffs than others, there will be some market -- some economic uncertainty there. So do you see volumes actually going down like previously? Or will market -- sorry, will the volumes be stable moving forward? Then lastly, my last question is more of a general question with tariffs and how does that impact cost like, let's say, for steel, for packaging? Is there any indirect impact to cost for the group as a whole? Yes. These 3 are my questions.

Llelleythan, this is Sopon from Bangkok, [ separate ] group. The first question was on the molasses, I believe, that the impact of the lower cost coming and when that will be happening. So I think from our estimation and following on the numbers, so it will be to our cost -- average cost will be around the fourth quarter this year, our budget year.

Llelleythan, this is Lester here. To talk about your question about how you see the outlook for international markets for the rest of 2025. I guess, I speak only for the Vietnam market. We've seen the research numbers, the initial numbers for consumer confidence, and that has come down, one of the lowest rates, one of the lowest, not the lowest since COVID. So it doesn't look good in that sense for consumer confidence. But on the bright side of things is when the market takes a downturn, companies like Sabeco tend to do well because people down trade. We are primarily a mainstream brand company and the bulk of our volumes are there, and we sell in channels that cater to the mainstream. So with the downturn, I believe there is a silver lining for Sabeco moving forward. But the entire market, the entire beer market in Vietnam, I believe, will be challenging.

Yes. Pisanu speaking about tariff. I will be answering in a very short way. We have only 1 item that we do have the business with the U.S.A. that is only [ hubs ]. And we have already crossed all the risk by bringing in all the [ hubs ] that we ordered from the state into our hand in Thailand and keep in our freezer. So there will be no -- nothing, no impact at all to us no matter what's going to happen. About the machineries or the spare part or technology or whatsoever, we don't rely on them at all. So I think we will not be harm or anything by this trade war.

Our next question comes from the line of Selviana Aripin of HSBC Limited.

My question, I guess, primarily is probably a follow-up to the earlier question on beer, particularly in Vietnam. I guess, your competitor actually showed pretty robust numbers, which probably implies, I guess, Sabeco losing market share. And so, I guess, I do [indiscernible] that confidence is actually picking [indiscernible].

Selviana, I think we lost your line. Is she with us?

It seems that Selviana's line is disconnected. Shall we move on?

Yes, sure, sure.

Our next question comes from the line of Zheng Feng Chee of DBS.

Can you hear me?

Yes, we can hear you.

Right. Okay. So a couple of questions here. So firstly, in terms of the spirits, can I check what has actually changed in the spirits market in Thailand that warrant that step-up in marketing spend? And should we expect that level of spend to persist? So that's my first question. And my second question would be in terms of beer, I understand that you actually took a one-off loss. So actually, if you remove that one-off loss, if you look at the first half, actually what would be the growth like if you exclude that one-off kind of expense loss? Yes, those 2 questions for now.

Khun Zheng Feng Chee, this is Songwit from Bangkok. So from your questions about the situation of the spirits in Thailand, I would say that from the last meeting, I think overall, as you may aware that overall situation in Thailand for the overall economy is still not doing really well. So that create for the poor consumption. So I would say that our spirits in Thailand are not really growing. I would say that we align with the growing of the overall economy in Thailand. Okay. And, Zheng, for the overall A&P for Thailand, I think we -- right now, we are trying to -- we control in order -- I mean, our priority is to protect our bottom line. So we are in the control mode of the A&P.

Zheng Feng, for the onetime in the beer, especially on the -- we put on the Q2. Actually, that one is coming from -- if you can see in the note to financial as well because of the Sabeco sales in this quarter, we have acquisition, used to be the associate company called Sabibeco. So then by the accounting principle, we need to revaluation of the associate company. So we have some loss from fair values about THB 120 million. But actually, it's a noncash one. The difference will go to the goodwill that is onetime, which is going to be not happening in the next quarter.

Our next question comes from the line of Xuan Tan of Goldman Sachs.

My first question is on Vietnam beer. If you look at Heineken's results, it seems that they actually gained share in first quarter. Just wanted to understand what is happening there because is it just purely because of Têt or because it kind of -- it is kind of counterintuitive to what you mentioned about down trading.

Xuan, yes, let me -- yes, the down trading part is the outlook for 2025. It's for the upcoming quarters. But yes, you answered your own question there about the effect of Têt. And I will show it on our call on Monday because Sabeco's call is this coming Monday, I was going to present one of the very rare times a share chart. Yes, we did lose share in January and February. It was the Têt effect, but we rebounded very well in March. If you look at the brand chart, Bia Saigon hit the highest share, I think, in the last 4 or 5 years in the month of March. So, yes, it was the Têt effect, and we caught up in -- by the end of March already.

Got it. Super helpful. Second question is on Thailand beer. Yes. On Thailand beer, we've seen pretty strong volume. And on the flip side, I guess, spirits is a bit weak. Can you help us understand on the ground what we have seen for first half? And what's the expectation for these 2 segments going to the full year?

Okay. This is [ Tip ] for beer Thailand. For us, the market situation for beer Thailand going forward, it looked pretty okay over the past quarter. But going forward, we start seeing the downward trend, especially from the AC Nielsen start dropping over the past 2 months. And we see the future, it's not that positive or still challenging. But, however, we protect our profitability. We try to manage our cost and whatever that we can manage to protect our bottom line.

And how about Thailand spirits?

Actually, I mean, from report that if you see between the first quarter and second quarter, you may see that we see a little bit growth in the second quarter. And what I maybe just add a little bit that we also -- for the Songkran, I think we also see a little bit of the positive factor as well. So that's all I can say.

Our next question comes from the line of Permada Darmono of UBS.

Can you hear me?

Permada, we hear you.

I wanted to clarify on the beer revenue in Vietnam. That's my first question. It is down 19% year-on-year. Yes, there's a Têt effect, but down by nearly 1/5. That seems a little bit steep. Can you give us some color why that might be the case? I know your main competitor is known for being very promotional during Têt, but this is a comparison against your own numbers in the first quarter of last year, so down nearly 1/5. If you can give us some color on that, Lester, that would be much appreciated.

Permada, yes, no issues. The main -- there are 2 big reasons for that. One is the timing of Têt. So -- because Têt was a little earlier this year, we saw some of the benefits of our early sell-in in November, December already. So Q1 versus Q1 doesn't 100% equate to Têt versus Têt because of the timing of Têt. So, that was a big one. The second issue also was, internally, we deliberately held back a little bit of the Têt sales. What we didn't want to happen, as we've seen in previous years, is overstocking for Têt. And then, immediately after Têt, you see price instability of our agents dumping stock. And I think we did a good job controlling that, which is why we see our share shoot up in March right after Têt. Again, like I mentioned, it's the highest in the last 4 or 5 years for Bia Saigon. So it was some intentional holding back of Têt loading, as well as timing of Têt last year versus this year.

And how would you characterize the inventory level in the distribution system now? Is it healthy or quite short? How would you...

Yes. It's healthy. We cleared out a lot of stocks in March and April. So we are cleaning up the pipeline. Obviously, we didn't want an overloaded pipeline as we used to see in previous years right after Têt. So it's healthy now, single digit in terms of number of stock days.

And what about for the industry? Is the level of stock for the industry, there's an overstock in the distributors like you worried? Because my question is also -- obviously, that could impact aggregate sales or your own sales.

Yes. Permada, it's hard for me to comment on our competitors on -- especially on their stock levels. Yes, I don't have a very, very clear picture, although walking the market, I would say it's quite high. Maybe we can answer this in a lot more detail on Monday.

Yes. And Permada, normally, we don't want to comment on our competitors though. We more -- are talking about our performance.

But my question was for the -- I understand -- but it was for the entire industry. So because like [indiscernible] comment in the outlook [indiscernible].

Yes, the industry, who is in the industry. So yes, we refrain from making the comment.

Okay. Moving on to Thailand. Normally, in a slow environment in Thailand, spirits tend to do better than beer. If I look at the second quarter, the rate of growth in spirits is weaker than beer. I would have anticipated spirits to be stronger than beer in a slowdown. How can we understand the numbers?

This is Songwit again from Bangkok. So overall, I mean, if I understand well, your question is what happened for the spirits in Thailand in the second quarter and why it goes slower than beer Thailand in the second quarter. So I will say that, yes...

Yes. Why did spirits grow slower than beer?

Yes, yes. Okay. So it was, how to say, not a growing economy in Thailand. And for [ our service ], we still were selling a little bit stronger than last year. However, we don't get any benefit from the tourists that are coming to Thailand. The tourists, they prefer to take the other beverage and [indiscernible].

Permada, this is Ueychai. I think because beer benefits a lot from tourists, tourists drink beer. They don't drink white spirit. So spirit really depends on local economy, which you can see, you understand that it's not very good during this time. So that's the reason why beer overgrown spirit, okay? If the economy coming back, then the spirit will probably follow the growth of the general economy.

So it's just purely the tourist effect then essentially that's driving the beer volume growth incrementally versus spirits?

Correct.

[Operator Instructions] Our next question comes from the line of Meghana Kande of CGS International.

Can everybody hear me?

Yes, we hear you, Meg.

So I have 3 questions. So the first is on beer volume growth, I think, in the second quarter was a bit of a slowdown compared to a really strong first quarter. So -- and it was also a bit slower compared to industry beer sales as well. So just trying to understand how -- what was the trend in your market share in the second quarter? And any color on whether you see the need to be more aggressive in your promotions going forward? And maybe just any color on also your performance during Songkran recently would also be helpful on the beer side. So that's my first question. The second is on the input costs for beer. So any color on how that is trending for beer? And even for F&N, I think -- today, they posted really strong revenue, but input costs impacted their gross margin. So just wondering how the input costs for your F&N side and the beer side are going? And the third question is on Vinamilk of -- the reasons behind the poor performance this time.

This is [ Tip ] again on beer Thailand. Actually, our beer volume for the second half is also growing. We actually grow from our market share local, okay? We gain from the market share, which -- not only the tourists, okay? So we still see good momentum in the second quarter. Especially after Songkran, we also -- good momentum continued, okay? On the cost side, I would say that we are -- thanks to everyone and also God, we actually get a very good price actually, especially from our raw mat and the packaging materials. For example, the [ malt ] also decreasing, and we hedge and book in advance. At least we confirm that we can protect our profit as planned.

This is Kosit. Let me answer on the input cost on the F&N side. I think if you're aware of -- I think we have a very favorable situation on the packaging side. Tin can, PET resin, I think both costs are coming down. I think the only issue we keep watching is the palm oil, which is -- the cost actually increased a little bit. And I think pretty much on the sugar side is also a good trend as well. So I think for the F&N, that's not so much worried about because the dairy products, with the volume that we are now growing, I think we have anticipated on this one, and we have a good stock on our raw material. Thank you.

Yes. In response to your question regarding Vinamilk and the reason for the poor performance in the first quarter, I think the general question -- the general answer really is consistent with what we've seen in Sabeco. There's basically been a poorer consumer sentiment, poorer trade sentiment. I think that affects all the consumer goods. And that's what's going to be the challenge, I think, in the months ahead. I think the uncertainties created by the tariff recently and what's been going on geopolitically has affected consumer confidence. So I think that's generally the main reason. I mean, of course, you know also that Vinamilk has done some restructuring of its own route to market, and that takes time, of course, to show results. And these are all publicly available information. They just had their call, I think, last week. So you might want to speak to their Investor Relations team.

Our next question comes from the line of Paul Chew of Phillip Securities. [Technical Difficulty]

Ray, you can -- I think you can switch to the next in the line.

Our next question comes from the line of Meghana Kande of CGS International.

So it was just a follow-up from one of my previous questions about the inventories for malt beer. Just wondering how long you expect these inventories to last and when you would have to replenish them? Yes. And second question would be on the tourism side with the recent news about a potential lift of the ban of alcohol sales during the afternoon and during Buddhist holidays. So just wondering how much of an incremental impact you see from that? Is it pretty sizable? Or just any thoughts on that?

No, no, no. Let me take your question. I think only for you that I can give this. I think it's almost 20% down from last year. And our purchase can cover the whole of this year.

Well, I personally -- probably not much because currently, even on that religious day, they're still drinking anyway. So I don't think that it will be impacted very much.

Our next question comes from the line of Selviana Aripin of HSBC Limited.

I wanted to check on, I guess, the outlook around your, I guess, brand building, particularly for spirits. How do you -- how should we think about, I guess, your brand buildings for spirits outlook going ahead into the second half of the year? Should we expect any more?

Khun Selviana, this is Songwit from Bangkok. I think if I understand correctly, you're asking about the activity of brand building expense for the second half of the year. So I will say that normally, in Thailand, the second half of the year is, what we call, the low season after Songkran. So I would say that for the overall brand building, it's going to be, let's say that in our control due to the seasonal.

Okay. Sorry, just to get my understanding correct, the spirits brand building is primarily targeted at your -- I guess, your local brands, right? We're not talking about one of your travel channel or that sort of thing, am I right?

Yes. I mean, actually, for Thailand, I would say that the majority for the first half of this year, we launched 2 brands. The first one that we call PRAKAAN, the first Thai whiskey, single malt. So, that one, it was the first launch that -- so we had that expense for the first quarter. And in second quarter, we just launched, we call -- local white spirit, a locally supplied beverage called Sato in Thai. And it is a very innovative product because it is the first Sato sparkling in can format. So we have just expense for the new product launch in the first quarter and the second quarter.

Any more that we should expect in the second half of the year?

Right now, we don't -- actually, we -- I mean, we don't have any plan for the launch for the new product yet.

Our next question comes from the line of Paul Chew of Phillip Securities.

Sorry for the technical issue earlier. Just 3 questions for me. The first is regarding the product mix of your spirits. Could you maybe share a bit of the performance between the brown and white spirits? That's my first question. My second question is just on the weaker U.S. dollar. I'm just wondering, can we expect some creep up in margins if the trend continues, all else being equal, of a weaker U.S. dollar against the Thai baht? And my final question is, can you maybe give some color on maybe just consumer sentiment in Thailand? I think you mentioned it could be challenging. It was never great in the first place, but I just wondered, has it maybe worsened recently because of the tariffs.

For the first question about the breakdown, actually, if you see our report, we don't really separate white and brown. So for this question, sorry that we cannot really break down for you. But you can see it as overall, majority is still coming from Thailand anyway.

Yes. I was wondering if -- the mix in performance and not so much the percentage share, but has there been any particular difference in performance or generally in line?

This is Prapakon, Group CFO. I think on the breakdown of white and brown, we normally don't disclose this. And generally, they're all in line with the same trend, just a matter of different growth factors. When they go up, they go up together, but they normally don't diverge from each other. But anyway, back to the questions on foreign currency exchange or U.S. dollar strengthening or weakening. The current what we've seen, and we are -- on a consolidated basis, we are an Asian -- ASEAN company or Southeast Asia company. So our revenue is a basket of both Thai baht, Vietnamese dong or Malaysian ringgit and Singapore dollar. And then, so far, the currencies have been moving in the same direction. So I think whether weakening or strengthening of U.S. dollar, I think we don't see that playing a role in shifting our profitability or margin around.

Our next question comes from the line of Llelleythan Tan of UOB Kay Hian Research.

I actually have 2 questions, but one was just -- so I have one question about any potential for price increases. So are there any SKUs within both spirits and beer that you see a potential for any price increases moving forward? Because like, I guess, with higher cost of goods sold, higher raw material costs and packaging, do you see any potential for some SKUs that price increases haven't been implemented before to actually see the potential actually increasing it in the next few quarters? Yes, that's my question.

So I think on potential price increases, remain to be seen as how the economy is affected or not affected by the ongoing change in trade environment. I think because the difference in tariff or change in trade environment may impact each economy differently. So we actually remain to see that first before we make any decision. And if the market or if the economy remains soft, it's not likely that a price increase will be factored in any of our major core market at this point.

Our next question comes from the line of Xuan Tan of Goldman Sachs.

Can I follow up on Thailand spirits? If you look at past cycle where economic growth was weak, do we see down-trading from brown to white? Or is it just weaker volume as a whole? And also, if you look at the current cycle that we are in, do you expect similar trend to follow? Or is there any difference that you think could happen this cycle?

Yes, Songwit again. So thanks for your question. So normally, for the consumer trend in Thailand, it is true that either the economy not very well, it seems that the consumer may be trend downward from brown to white. So that's right. Thank you.

Is that what you are observing now as well?

Not so apparent right now. We are watching it. I think it's -- normally, it's happening like that. In the history, it's always like that. But currently, we haven't seen that much yet, but we are looking forward to see what happens.

And in terms of -- I guess, while you are still monitoring that in terms of your marketing activity, how you're running the spirits business, what is your strategy over the next 1 year?

Yes. I think that's right. I mean, based on our marketing -- actually, it should be our A&P spending strategy. Right now, I think you may hear that we -- as ThaiBev group, we have the core area management. Also -- we also focus on the [ position ] management. So that means, if we have to spend, we have to spend based on the area or based on the product category in each region or even the province or the [ umbrella ]. So I would say that we have more control, and we are also more precise for the spending.

Our next question comes from the line of Xuan Tan. Sorry, our next question comes from the line of Andy Sim of DBS.

Can you hear me?

Yes, Andy, we can hear you.

My question actually pertains to the financial position. If we look at the net debt-to-EBITDA, it has actually crept up now to above 3.11 from 2.9. Can we sort of like get a sense of the onward -- or rather going forward, the plans for further deleveraging? And also, in relation to that, maybe in terms of plans or rather updates with respect to BeerCo, as well as the talks about strategic investor. So this is actually 2 parts of one question.

Andy, this is Prapakon. So on debt-to-EBITDA trending, well, I think our EBITDA -- yes, our EBITDA is a bit slightly weaker than earlier year. So I think we'll continue to monitor and we'll focus on profit generation, cash flow generation at this point. If we see the economy -- if the economy gets softened, we'll tighten our expense even more. That's -- I think that's the game plan that we have. In terms of the debt, there's some spending that was required for the expansions at the moment that has been announced or discussed earlier. So that's continued. I think based on this, we still foresee in our forecast that our headline or our total indebtedness will continue to come down. We don't expect that to just continue to creep up. At the moment, it's -- we'll probably have to see in the next 6 to 12 months after we complete all this spending, our debt will start to probably head back down again. So I think that's 2 things that arrive to that ratio. I wouldn't comment on the potential IPO and the strategy because the investor discussions because I think if we have anything, we'll make a proper announcement, timely announcement on that. At the moment, the market remains soft. So I think we'll just continue to monitor our potential -- the IPO, I think, depending on where the markets are.

Just a follow-up on the debt and EBITDA. So in the light of this, will you see -- I probably assume that there's no issue in terms of the refinancing of your debentures that's upcoming. And how will you see in terms of the interest rate in the light of current environment? Do you expect to see lower interest rate?

Andy, so let's just think back and then future potential. Back is, the interest rate has been rising in the past 2, 3 years since COVID ended. We have experienced somewhat of average interest cost rise over the past 2 years. And that came from just the base interest rate itself. It had nothing to do with our credit spread. Our credit spreads remain very competitive. We generally have our funding from ThaiBev groups in Thailand. We continue to be -- benchmark ourselves against all the blue-chip names. So we have very competitive funding. On a consolidated basis, we also have F&N now, and F&N continue to have a very good pricing as well, what we're seeing. Now going forward, future-wise, there are 2 things that we see. One, interest rates are coming down. The base interest rates are coming down. The Central Bank in Thailand has started to reduce interest rate. There's more expectation of interest rate to come down further. Currently, on the IRS basis, the floating rate is actually more expensive than the fixed rate. Fixed rate, basically 30 to 50 basis points cheaper going out to 5 years. So we have started to take advantage of that as well. So rate -- basically, what I'm saying is, in the past 2, 3 years, the interest rates have risen. We think our cost -- interest costs have peaked. We believe that in the next 12 months, we will start to enjoy lower interest cost on our debt, both from Thailand perspective or even Singapore's perspective. The last factor is that we do see ample liquidities from both banks, bonds and capital markets. We do see ourselves as a blue-chip company that we are sought after security in terms of issuing bonds. And also lending-wise, banks continue to lend to us at the credit spread that are shrinking. So that's what we're seeing. So I think we're quite confident. Both the interest rate and credit spreads are lower for us going out next 12, 18 months.

If I may, a follow-up question with respect to the spirits A&P spend. Can I -- because traditionally, when the economy is soft, I understand that the company's strategy is actually to pull back on spending because no point in spending if consumers are not buying or consuming. So with respect to second quarter, in terms of investment in brand investment and marketing activities for spirits [ pertaining ], would this be arising from the new brand that was launched that Khun Kosit -- Songwit, sorry, has indicated earlier? Or is it on other things? Yes. That's my question.

Yes, yes, thank you. I mean, for the -- I would say that for the second quarter is -- the activity that we have one brand that we launch. And also we have the marketing activity that we have done for the [indiscernible] in the second quarter.

So can we assume that -- or rather expect that this -- given that second half is seasonally weaker and also a low season, would you expect spending to taper off as a percentage of sales?

Yes. For the second half, that's true. During the low season, I think all the marketing activity is going to, let's say, lower activity comparing to the first half of the year. Yes, we already -- and so for the SG&A for the second quarter, mainly for the -- that's only for the normal [indiscernible] promotion.

Our next question comes from the line of Meghana Kande of CGS International.

Just one regarding the marketing side for the beer segment. So just wondering if you're at a comfortable level right now or just your thoughts on the marketing strategy going into second half for the year.

Yes, in terms of the marketing spending, I think it's one part of it. It's the one that is a key driver of our volume growth. So we're still spending for the second half, but definitely, it will be more efficient, and because of the activities and festive season is probably lower, so the spending in terms of the ratio will be continued.

This is Ueychai. Normally, first half, we have International New Year and Thai New Year. So A&P spending in Thailand is quite heavy in the first half. Second half is a lot lower. Especially, from July to September is a Lent period, Buddhist Lent period. During those times, A&P will be very low. So bottom line is, the second half A&P will be lower than the first half on both beer and spirits in Thailand. Thank you.

Meghana, let me talk a little bit about the Vietnam beer market A&P spending. I think similar to Thailand, we also have heavy spend at the end of the year and the beginning of the year, the Christmas-New Year season, as well as Têt. For us, we don't have Buddhist Lent. We do have a heavy summer coming up. Summer is also another big drinking season for us. So -- but what we want to do is control the spend. This year's Têt season spending, overall, I think the entire market was a little bit heavier than last year, and we had to keep up. We're hoping that we can be a lot more efficient in the upcoming summer season for all the spending for the high drinking season.

Our next question comes from the line of Permada Darmono of UBS.

Just wanted to get an update on your plans on AgriValley. Previously, it was stated that the rationale to basically combine or consolidate Fraser and Neave is partly to deepen ThaiBev's exposure to high-growth nonalcoholic beverages and dairy segments. And one of this is, of course, AgriValley. I note that F&N has taken the first 2,500 cattle with a final plan to ramp up to 20,000 cattle. Can you just maybe provide us with some kind of guidance how long the start-up losses will persist? And with the ramp-up to the full capacity, when will we start seeing the higher growth rate that we can expect from your dairy operation?

Thank you, Permada. This is Kosit. I think you have done a lot of homework for our AgriValley projects. Thank you very much. I just would like to correct, that 20,000 ramp-up was at the Phase 2. I think the initial projection for us is to reach 10,000 cows. That was the part of the first phase. And you are right that actually we have imported cow from Chile. I think that was more than 2,500. It just arrived in April. And I think the indicator of the first milking has gone quite well. We have anticipated a higher than industry average in Malaysia. But I think this is too early to -- for us to judge, but the rate keeps improving at this point. So if all goes well as plan, I would say, I think for this project, I think there was -- the ramp-up period would take close to about 2 years, I think, as what we actually planned. But that depends on a lot of factors, right? So I would say, at this point, it would be early to tell whether or not -- but everything looks good on our side. It seems to be on plan. Please continue to keep studying us and perhaps following us. We'll keep you posted on the updates. But so far, I can say that things are going well. If all goes as planned, it will be close to -- it's about 2 years for us to be able to reach the target that we want. Thank you.

But is that 2 years to 10,000 milking cows or -- for Phase 1, or 2 years to 20,000?

Yes, I think it's quite a simple mathematic because when you bring in 2,500 cows, it carries the babies, right? So that 2,500 will grow to 5,000. So we need to bring another 2,500, and it will give birth to another 2,500. That's how we're going to reach 10,000. I think the point is not about reaching 10,000. It's about having a very quality milk, meaning that there's a lot of factors that we need to be mindful. I think, for example, you know that this AgriValley, it's 3 parts of it, right? Cow is just one part. The biggest part is the crop. We are growing a lot of crops to feed the cow, especially corn, yes. And the third part is, we have the processing plant, which will be coming online in the coming August or if not September. So that's what is our target. So 10,000 cows would be easily achieved. I think what is the challenging part for us is to have 10,000 cows and more giving birth and giving good quality of milk and a good, I think, cost of the crops that can actually feed all the cow.

And maybe just one follow-up on that. Is the target solely for Malaysia? The dairy penetration per capita in Malaysia is already quite high. Or is it also to consider other export markets?

Well, at this point, I think, our initial goal is to address the -- is to have a good milk supply for Malaysia. Malaysia's consumption is not high, I think, just to correct you. It's more that Malaysian actually consume a lot of recombined milk, right, not the fresh milk. So our goal is to provide good access to quality fresh milk for Malaysian people.

There are currently no questions on the line. [Operator Instructions] As there are no further questions, I will now begin the closing comments. Please go ahead, Ms. Namfon Aungsutornrungsi.

Thank you, everyone, for joining the call tonight. And if you have any more questions, please feel free to contact IR department at [email protected]. Thank you, and have a good night.