11. Financial Status and Operating Results

Financial statements in this section (page 39-45) have been audited by
the auditors of KPMG Phoomchai Audit Ltd., who express unqualified
opinion on these financial statements.

11.1.2 Liquidity Ratio

  ------------------------- -------------- ------- -------- --------- ------- --------
                            CONSOLIDATED                    THE               
                                                            COMPANY           
                                                            ONLY              

                            2009           2008    2007     2009      2008    2007

  Current Ratio (Time)      1.8            1.8     1.7      1.8       1.8     1.7

  Quick Ratio (Time)        0.8            0.7     0.8      0.8       0.7     0.8

  Operating Cash Flow to    0.4            0.2     0.4      0.4       0.2     0.4
  Current Liability Ratio                                                     
  (Time)                                                                      

  Receivable Turnover Ratio 16.9           18.3    18.0     16.9      17.5    17.9
  (Time)                                                                      

  Average Collection Period 21.3           19.7    20.0     21.3      20.5    20.1
  (Day)                                                                       

  Inventory Turnover Ratio  35.8           31.9    36.8     36.8      34.1    36.8
  (Time)                                                                      

  Sales Turnover Ratio      10.1           11.3    9.8      9.8       10.5    9.8
  (Day)                                                                       

  Account Payable Turnover  12.8           14.0    14.2     12.7      13.9    14.1
  Ratio (Time)                                                                

  Average Payment Period    28.2           25.7    25.3     28.4      26.0    25.6
  (Day)                                                                       

  Cash Cycle (Day)          3.2            5.2     4.4      2.7       5.1     4.3
  ------------------------- -------------- ------- -------- --------- ------- --------

11.1.3 Profitability Ratio

  ------------------------- -------------- --------- ------- --------- ------- -------
                            CONSOLIDATED                     THE               
                                                             COMPANY           
                                                             ONLY              

                            2009           2008      2007    2009      2008    2007

  Gross Profit Margin (%)   24.5           24.1      26.1    24.3      23.9    26.1

  Operating Profit Margin   1.6            0.3       1.5     1.6       0.3     1.7
  (%)                                                                          

  Non-operating Profit      0.8            0.8       1.1     0.7       0.8     1.0
  Margin (%)                                                                   

  Operating Cash Flow to    370.8          1,125.1   450.6   356.0     866.0   405.9
  Operating Profit (%)                                                         

  Net Profit Margin (%)     1.8            0.7       1.7     1.7       0.7     1.8

  Return on Equity (%)      5.5            2.2       5.2     5.4       2.3     5.4
  ------------------------- -------------- --------- ------- --------- ------- -------

11.1.4 Efficiency Ratio

  ------------------------- -------------- ------- ------- --------- ------- -------
                            CONSOLIDATED                   THE               
                                                           COMPANY           
                                                           ONLY              

                            2009           2008    2007    2009      2008    2007

  Return on Assets (%)      3.6            1.5     3.5     3.5       1.5     3.6

  Return on Fixed Assets    10.0           3.8     8.7     10.1      4.0     9.5
  (%)                                                                        

  Asset Turnover (Time)     2.0            2.1     2.0     2.1       2.1     2.0
  ------------------------- -------------- ------- ------- --------- ------- -------

11.1.5 Financial Policy Ratio

  ------------------------- -------------- ------- ------- --------- ------- -------
                            CONSOLIDATED                   THE               
                                                           COMPANY           
                                                           ONLY              

                            2009           2008    2007    2009      2008    2007

  Debt to Equity Ratio      0.5            0.5     0.5     0.5       0.5     0.5
  (Time)                                                                     

  Interest Coverage Ratio   *              *       *       *         *       *
  (Time)                                                                     

  Operating Cash Flow to    2.2            2.8     5.4     2.1       2.7     5.3
  Total Cash Outflow Ratio                                                   
  (Time)                                                                     

  Dividend Payout Ratio (%) 150.4          142.7   72.3    158.3     143.0   70.7
  ------------------------- -------------- ------- ------- --------- ------- -------

* No Interest bearing loan and interest expense.

11.2 FINANCIAL ANALYSIS AND EXPLANATION

Assets Composition and Capital Structure

The Company’s assets shown in the consolidated financial statements
mainly consist of fixed assets such as land, buildings, machinery and
equipment (36 percent of total assets), inventories (24 percent), cash,
bank deposits, and short-term investment (16 percent), accounts
receivable (12 percent), and other assets for the balance (12 percent).

The liability to equity ratio is 1 to 2 indicating the strong financial
position of the Company. 26 percent of total liabilities are deposits
for bottles and cases whereas accounts payable and other payables
represent 53 percent, accrued expenses and corporate income tax payable
14 percent, and other liabilities 7 percent. The capital structure
consists of Baht 266 million paid-up capital, Baht 1.342 billion premium
on share capital, and retained earnings of Baht 4.795 billion.

Operating Results

Net profit for 2009 is stated in the Consolidated Profit and Loss
Statement at Baht 353.7 million, an increase of Baht 214.1 million from
the previous year. Major reasons for the increase in profit were the
increase of gross profit, mainly due to the increase in sales volume
together with cost saving initiatives in product costs and lower selling
and administrative expenses, especially lower distribution costs
supported by a lower diesel price. These were partly offset by higher
income taxes resulting from higher profit. The increasing sales volume
was the result of promotional activities and the launching of new value
packages, while changes of consumers’ behavior toward alternative
beverages, and more players in the industry continued to be key
challenges. The increase in the cost of goods sold was mainly due to the
increase of sales volume, the impact of higher sugar prices, which
increased Baht 5 per kilogram since May 2008, and the increase in labor
costs offset by reductions in packaging material costs and effective
control of manufacturing overheads. The decrease in selling and
administrative expenses resulted from a significant decrease in gasoline
expenses contributed by the lower diesel price and usage related to the
improvement of the logistics and distribution systems as well as
continuing cost control and cost reduction offset by the increase of
salaries and wages due to annual merit adjustments and increased minimum
wages, and employee welfare, as well as the increase of marketing and
sales promotion expenses to boost sale volume. The improvement of
operating results for the year ended 31 December 2009 reflects basic
earnings per share of Baht 1.33 or Baht 0.80 better than the previous
year.

The company made concerted efforts to minimize the impact of negative
factors by executing a multifaceted cost reduction and efficiency
program while simultaneously driving sales of high margin products and
packages in both the carbonated and non-carbonated beverage categories.
These efforts combined with an improving economic situation have
resulted in a welcome improvement in the Company’s operating results.

Driving for Sales Volume – Aiming to boost its sales, the Company added
several new products and organized advertising and sales promotion
campaigns to stimulate consumer’s demand. During the year new products
such as Pepsi Green, Mirinda Super Lemon, Mirinda Sky Berry and
Tropicana Twister Pulp were launched. Further, several new package sizes
were introduced to attract value oriented consumers, these included 460
ml., 480 ml., 1.2 litre, and 1.5 litre were launched. The launch of new
products was supported by advertising and sales promotions through a
range of media including television, newspapers, bill boards, and
posters as well as via sales promotion activities such as lucky draws
and discounts.

Cost Control and Efficiency Improvement. Several cost saving measures
were continued, such as the change of packing format, the reassigned
line manning in order to improve efficiency, the improvement of the
logistic system and the rearrangement of sales routes to match the
selling and servicing areas, the tight control of diesel, power and
utility usages, the control on repair and maintenance and other selling
and administration costs including the effective spending on marketing
and sales promotion expenses. With all these efforts and initiatives,
the Company could overcome part of the negative impact of the increasing
costs and expenses and operated with a profit for the year.

  Summary of major profit and loss items is as follows:

Sales revenues of Baht 19.694 billion in 2009 increased by Baht 437.2
million or 2.3% over 2008. Sales revenue growth came from all products
except Red Carabao energy drink.

  Other income of Baht 98.1 million declined by Baht 22.1 million or
  18.4 percent from last year.

  Income from the associated company of Baht 61.9 million, increased by
  Baht 19.1 million and

represented the share of profits from the associated company.

Cost of sales of Baht 14.869 billion, increased by Baht 261 million or
1.8 percent as a result of the increase in sales, higher sugar price
impact, higher salaries and wages for production crews and increases of
other production overheads. This was partly offset by lower production
fuel prices and the impact of production cost saving initiatives.

Selling and administration expenses of Baht 4.511 billion declined by
Baht 88.6 million or 1.9 percent from last year as a result of lower
fuel prices while cost control and efficiency improvements as mentioned
earlier offset by the increase in staff cost.

With the increase in sales, which contributed additional gross profit,
lower fuel prices, and total cost saving initiatives, profit before
interest expenses and tax was Baht 474.1 million, an increase from last
year by Baht 261.6 million or 123 percent.

Corporate income tax for the year was Baht 120.4 million, an increase of
Baht 47.5 million due to higher profit.

  Consolidated net profit for the year of Baht 353.7 million increased
  over last year by Baht 214.1 million

or 153 percent.

The Company’s financial position reported in the consolidated financial
statements as of December 31, 2009 revealed total assets of Baht 9,766
million with strong financial liquidity consisting of cash on hand, bank
deposits, and short-term investments, of Baht 1,516 million. Cash
available was determined after accounting for all financial requirements
for operations and capital investment. Trade receivables of Baht 1,166
million increased from last year by Baht 113.6 million due to the
increase of sale revenue in the last quarter. Inventories of Baht
2,391.3 million decreased from last year by Baht 62.6 million due to
decreases in returnable bottles and cases resulting from deferral of
purchase for new bottle and case replacement awaiting PEPSI’s new logo
launched in early 2010, decrease in finished goods related to lower
buffer stock resulted from high sale activity to close year 2009.
Land, buildings, and equipment of Baht 3,538.0 million, decreased by
Baht 163.2 million mainly due to depreciation charged during the year
and tight control on capital investment. Total liabilities of Baht
3,377.7 million increased by Baht 381.3 million from last year mainly
due to increased trade payables which were related to the increase of
sale revenue in the last quarter, accrued expenses, and corporate income
tax payable, which was related to increased net profit, and non-current
liabilities which was mainly from additional provision for employee
retirement. Shareholders’ equity increased by Baht 160.8 million, from
Baht 6,227 million in 2008 to Baht 6,388 million at the end of 2009, as
a result of net profit for the year net of the payment of 2008
dividends..

In the Statements of Cash Flows, cash outflows for investing activities
included the spending on fixed assets of Baht 568.4 million. The
spending was the purchase of production machines and equipment, repair
and maintenance, expansion of plants and warehouses, and marketing
equipment to support sales and distribution.

11.3 Auditor’s Remuneration

11.3.1 Audit Fees

2009 Annual audit fee: Serm Suk Public Company Limited 1,200,000 Baht

2009 Annual audit fee: Serm Suk Beverage Co., Ltd. 560,000 Baht

2009 Annual audit fee: Serm Suk Holdings Co., Ltd. 140,000 Baht

11.3.2 Other Services

  - None -