Financials

2007
11 May First Quarter Financial Statement
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27 Feb Full Year Financial Statement
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2006
14 Nov Third Quarter Financial Statement
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10 Aug Second Quarter Financial Statement
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Review of Performance
Management Discussion and Analysis
The Company has included the assets, liabilities, and operations of Pacific Spirits (UK) Limited and Best Spirits Company Limited, which it acquired at the end of October 2006, in the consolidated financial statements for quarter one, ended 31 March 2007. The consolidated financial statements for the same period of 2006 have been restated for comparison with quarter one, 2007.

Group
For quarter one, ended 31 March 2007, total sales revenue of the Company was Baht 25,961 million, increased 11.4% or Baht 2,662 million from Baht 23,299 million in the corresponding quarter of the previous year, mainly due to higher sales revenue from the beer/water business of about 16.2% and higher sales revenue from the spirits business of about 7.6%.

Gross profit was Baht 7,651 million, an increase of Baht 421 million or 5.8%, mainly due to the increase in the sales revenue from the beer/water business.

Earnings before interest, tax, depreciation and amortization (EBITDA) was Baht 5,877 million, an increase of Baht 703 million or 13.6%, mainly due to the increase in the beer/water business sales volume and gross profit while promotional goods for sales promotion of the beer/water business decreased to 5.4% of total beer sales volume.

Net profit was Baht 2,878 million, up by Baht 335 million or 13.2% mainly due to the increase of beer sales, the decrease in marketing expenses and the decrease in interest expense caused by the reduction in the Company's debt when it repaid short-term loans using the May 2006 IPO proceeds.

The Beer, Soda & Drinking Water Business
Sales revenue was Baht 12,556 million, an increase of Baht 1,751 million or 16.2%, mainly due to the increase of low alcohol beer sales volumes. Total sales volume of beer rose 17.2% to 248.3 million litres. Low alcohol beer sales volume was 66.4 million litres, which increased from 2006 by 63.5 million litres. The sales volume of soda was 3.8 million litres and the sales volume of drinking water was 10.6 million litres, a decline of 4% and 1.8% respectively.

Gross profit was Baht 2,956 million, an increase of Baht 338 million, or 12.9%. This was mainly due to the increase of sales volume.

EBITDA of Baht 1,918 million increased by Baht 415 million, or 27.6%, mainly due to the increase of sales and gross profit and the decrease in marketing expenses caused by free promotional goods. The free promotional beer volume as a percentage of total sales volume decreased from 8.9% on average in quarter one of 2006 to 5.4% in quarter one of 2007.

Net Profit of Baht 608 million increased by Baht 119 million or 24.3% in Q1/2007 compared with Q1/2006. This was mainly due to the increase of sales, the decrease of the marketing expenses and the decrease of interest expense.

The Spirits Business
Sales revenue was Baht 13,559 million, an increase of Baht 959 million or 7.6% mainly due to an increase in the sales volume of brown spirits. The Company's sales were severely affected in 2006 by the increase on excise tax on certain types of brown spirits in September 2005. To overcome this problem, the Company re-launched a brand called Hong Thong in April 2006 and launched a new brown spirit called Blend 285 in October 2006. Both are well-accepted by consumers and have become significant contributors to the recovery of the brown spirits business.

Total sales volume of spirits was 124.2 million litres, which is derived from white spirits sales volume of 90.2 million litres, down 8.4% and brown spirits sales volume of 34.0 million litres, up 21.2%.

Gross profit of Baht 4,794 million in Q1/2007, showed a decrease of Baht 54 million, or 1.1%. This was mainly due to the decrease of white spirits sales volume, which has a higher margin than brown spirits and could not be compensated by the increase in the brown spirits sales volume.

EBITDA of Baht 3,712 million increased by Baht 86 million or 2.4%, mainly due to the decrease of promotional goods' volume. As a percentage of total sales volume, promotional goods decreased from 1.5% by average in quarter one of 2006 to 0.6% in quarter one of 2007.

Net Profit of Baht 2,162 million increased by Baht 51 million, or 2.4%, mainly due to the decrease of promotional goods and interest expense.

Industrial Alcohol Business Segment
Sales revenue of Baht 219 million reflected an increase of Baht 143 million or 188.2%, mainly due to the increase of Ethanol sales volume, which helped to compensate for the decrease of Alcohol 95 sales volume. Sales volume of Ethanol was 9 million litres, an increase of 201.2% and the average sales price was Baht 23.32 per litre, which increased by 22.7% over 2006.

Gross profit of Baht 33 million increased by Baht 10 million, or 43.5%, mainly due to the increase of sales.

EBITDA of Baht 53 million increased by Baht 56 million or 1,866.7%, mainly due to the decrease in idle costs.

Net Loss was Baht 6 million, down by Baht 41 million, or 87.2%, mainly due to the decrease of idle costs and the decrease of interest expense.

Gross profit of Baht 210 million decreased by Baht 188 million, or 47.2%, mainly due to high product cost arising from higher molasses prices and energy costs.

EBITDA of Baht 163 million decreased by Baht 203 million or 55.5% mainly due to the decrease of gross profit margin and higher administration expenses arising from higher employee expense.

Net Loss was Baht 22 million while net profit for 2005 was Baht 151 million, a change of 114.6% mainly due to the decrease of gross profit margin as mentioned and the increase of interest expense.

Related Business Segment
Sales revenue was Baht 1,739 million, an increase of Baht 131 million or 8.1%, mainly due to the increase of inter-segment supply of packaging materials.

Gross profit of Baht 256 million, showed an increase of Baht 96 million, or 60.0%, mainly due to cost control.

EBITDA of Baht 165 million increased by Baht 103 million, or 166.1%, chiefly due to the increase of the gross profit margin.

Net Profit was Baht 83 million increased by Baht 80 million or 2,666.7%, mainly due to the increase of the gross profit and the decrease of interest expense.

Financial Position

Assets

Total assets as at the end of March 2007 was Baht 85,139 million, a decrease of Baht 440 million, or 0.5%, compared with the end of 2006. Current assets increased by Baht 1,253 million, mainly due to the increase in cash and cash equivalents and inventories. Non-current assets decreased by Baht 1,693 million, mainly due to the sale of land and a building, called the ThaiBev Tower project, and depreciation of property, plant and equipment.

Liabilities

Total liabilities as at end of March 2007 was Baht 29,785 million decreased by Baht 3,240 million, or 9.8%, compared with the end of 2006. This was mainly due to the repayment of bonds.

The maturity of loans and bonds are as follows.

Shareholders' Equity

Total shareholders' equity as at the end of March 2007 was Baht 55,354 million, an increase of Baht 2,800 million, or 5.3% compared with the end of 2006, mainly due to the increase in retained earnings.

Liquidity

Cash and cash equivalents as at March 31, 2007, was Baht 2,453 million. The net increase from the beginning of the period was Baht 533 million. Details of activities are as follows.

Net cash provided by operating activities of Baht 4,937 million was mainly derived from net income of Baht 2,878 million and adjusted with non cash items, such as depreciation and amortization, of Baht 1,224 million.

Net cash provided by investing activities of Baht 496 million was mainly due to the proceeds from the sale of land and a building, called the ThaiBev Tower project.

Net cash used in financing activities of Baht 4,821 million was mainly due to the decrease in bank overdrafts and short-term loans from financial institutions and the repayment of bonds.

Commentary On Current Year Prospects

Business in Thailand
Explosions in Bangkok on New Year's Eve reduced the consumption of alcoholic drinks generally at on-premise outlets in January, particularly among late-night outlets frequented by young consumers. This situation gradually improved through February and March, though business at such outlets has yet to return to the level enjoyed prior to the incidents. As late-night outlets are a minor part of ThaiBev's business, the Company has not been negatively impacted. On the contrary, the situation has enhanced in-home consumption, which is the mainstay of the Company's business.

The Cabinet has endorsed the Alcohol Control Act proposed by the Ministry of Public Health and passed it to the parliament for further consideration. Until the bill is passed, the Company does not have a clear picture of the new regulations and thus cannot comment on the potential impact on our business.

The level of competition in both the beer and spirits markets has not changed significantly from the fourth quarter last year. Most of the beer and spirits distribution companies resumed TV advertising, but more discretely, in the form of trade promotions rather than consumer promotions, so as not to adversely influence the members of parliament who are in the process of considering the Alcohol Control Act.

Beer Business

ThaiBev's beer business performed well in the first quarter, maintaining the growth seen last year and achieving 17.2 per cent higher sales over the same period in 2006.

Last year, the Company decided to focus marketing efforts on its lower alcohol beers, Archa, Chang Draught and Chang Light. This strategy is now starting to bear fruit. They have been well received by young drinkers who prefer lighter, less bitter and easier-to-drink beers over traditionally high strength beers. Despite good volume growth, free promotional beer volumes continued to decline, becoming 25 per cent lower in Q1/2007 than the first quarter of 2006.

Spirits Business

The spirits market continued to be difficult during the first quarter of 2007. Last year, white spirits declined marginally, but brown spirits declined around 25 per cent following an excise tax increase in September 2005. During the first quarter 2007, white spirits were still marginally down on last year, but brown spirit sales recovered well. Hong Tong and Blend 285, launched in 2006, outperformed sales targets and helped the Company regain its position in the brown spirits business. Total spirits sales, both white and brown, declined just 1.8 per cent from sales during the same period last year.

As part of the Company's promotional activities to the trade, free promotional spirits are provided, but to a much smaller extent than beer. The level of spirits' free goods during first quarter this year was, similarly to beer, lower than the previous year. In Q1/2007, the Company gave 700,000 litres of free goods, which was 85 per cent lower than the same period last year. The implication is that the profitability of spirits improved in the first quarter.

Industrial Alcohol Business

The previous government announced it would stop importing 95 octane gasoline as of January 2007. Had this happened, it would have enhanced the demand for gasohol and industrial alcohol. However, the new government decided to postpone the import ban, which has turned the market around. Oil companies continue to import 95 octane gasoline and slow down the promotion of gasohol. The industrial alcohol business turned from being a sellers' to a buyers' market overnight. Pricing pressure from the major oil companies has put industrial alcohol producers in a difficult position, forced to operate under lower margins. This was exacerbated by a decline in demand for industrial alcohol. Thai Alcohol Plc. (a ThaiBev subsidiary) is the only company in Thailand with an industrial alcohol export license. It is therefore able to focus more on the export market and expects to continue to do so in future.

Sales of industrial alcohol during the first quarter 2007 was 9 million litres, 6 million litres higher than sales during the same period last year. It should be noted that last year we decided to stop production for several months due to low alcohol prices and high molasses costs. The period was spent conducting full maintenance on machinery and equipment.

Related Businesses

In 2007, we continue to invest in our glass bottle recycle terminal project. Three glass bottle recycle terminals are in the design phase. These terminals will help increase our efficiency in recycling used glass bottles, which will result in a reduction of packaging costs and support environmental conservation.

Business Overseas

IBHL (International Beverage Holding Limited) acquired Pacific Spirits (UK) in the last quarter of 2006. The integration of Inver House into IBHL is progressing according to plan and has begun to show promising results on the back of strong sales performance by Inver House Distillers.

On 29 March 2007, IBHL submitted a conditional bid of Rmb 980m for 100 per cent of Anhui Gujing Group Limited (AGGL) to the Bozhou State-Owned Assets Supervision and Administration Commission (the "Bozhou SASAC"). AGGL is a state-owned enterprise in China and engaged in distilling, hotels, real estate, finance and other businesses. It operates its distillery business through its subsidiary, Anhui Gujing Distillery Co., Ltd ("ADGC"), which is listed on the Shenzhen Stock Exchange.

On 3 April 2007, IBHL was informed by Bozhou SASAC that it had been selected to negotiate the final terms of the acquisition. If IBHL successfully completes the acquisition, it is ThaiBev's intention to retain only the distillery and liquor-related businesses of the AGGL group and to dispose of the other businesses to T.C.C. International Limited.

IBHL is in the process of setting up operations in the UK and USA to directly manage the sales of Chang beer in these countries. Initial results are anticipated in the second quarter of 2007.