MINT’s strong net profits in 2Q22 driven by record performance in European hotels

Minor International Public Company Limited (SET: MINT) today (11 August) announced its second quarter 2022 financial results, posting a core profit of Baht 1.2 billion, a strong turnaround both y-y and q-q from core losses of Baht 3.4 billion in 2Q21 and Baht 3.6 billion in 1Q22. Minor Hotels returned to profitability in 2Q22 for the first time since the COVID-19 pandemic, while Minor Food and Minor Lifestyle sustained their profitable operations. On a like-for-like basis that excludes the impact from IFRS16, as well as, losses from uncontrollable events related to movement of foreign exchange rate and the adverse operational environment in China, core profit in 2Q22 would have been Baht 2.2 billion, exceeding 2Q19 pre-pandemic level of Baht 2.1 billion.

On a reported basis, including non-recurring items, MINT posted a profit of Baht 1.6 billion in 2Q22 compared to a loss of Baht 3.9 billion in 2Q21. For 1H22, MINT reported a loss of Baht 2.2 billion, a significant improvement from the loss of Baht 11.2 billion in 1H21. In addition to its strong operating performance, MINT also continued to strengthen its balance sheet in 1H22 and has successfully brought its leverage ratio into full compliance with its debt covenants, notwithstanding its continued covenant waiver which extends through the end of 2022.

Minor Hotels recorded a significant improvement in financial performance in 2Q22, with core profit returning to strong profitability at Baht 1.2 billion compared to core losses of Baht 3.4 billion in 2Q21 and Baht 3.7 billion in 1Q22. The y-y recovery was attributable to generally stronger business operations across all key geographies. The European portfolio was the standout performer, with NH Hotel Group reporting record-high 2Q results and surpassing pre-pandemic performance for the first time since the emergence of COVID-19.

Hotels in Australia also continued to perform well, with average occupancy of 83% in the second quarter and average room rate soaring by 20% y-y, resulting in RevPar surpassing 2019 levels by 49% in AUD terms due to strong leisure and corporate demand boosted by the resumption of sporting events.

The Maldives also continued its strong growth trajectory, outperforming pre-COVID-19 metrics for the fourth consecutive quarter. Average occupancy rate of hotels in Thailand continued to build to 43% in 2Q22, while average room rate in June surpassed 2019 levels.

Minor Food’s core profit remained in positive for the eighth successive quarter in 2Q22 as the profitability of restaurants in Thailand, Australia and Singapore helped offset the challenging operating environment of China hub amidst full lockdowns in Shanghai and Beijing during April and May 2022. Nevertheless, overall financial performance quickly rebounded in June 2022 as China began to relax its COVID-19 restrictions, allowing dine-in service to resume. Group-wide total-system-sales increased by 13.3% y-y for the quarter, largely driven by higher store trading activities in all hubs except China, as well as, an increased number of stores in Thailand and store re-opening in Australia.

MINT’s liquidity position held strong with positive average free cash flow of Baht 7.7 billion during 2Q22 as a result of improved operating results. Cash on hand and total unutilized credit facilities remained strong at Baht 26 billion and Baht 32 billion, respectively, at the end of June 2022. In terms of balance sheet position, MINT’s net interest-bearing debt to equity ratio strengthened, decreasing to 1.30x at the end of June 2022 from 1.36x at the end of 2021 as a result of net debt repayments. This level of net interest-bearing debt to equity is well below MINT’s debt covenant of 1.75x, in which waiver was secured throughout the year. In the context of the rising interest rate environment, early repayment of some of MINT’s floating-rate debt later this year, coupled with interest rate hedging and its diversified debt profile, will mitigate the impact on MINT interest rate costs.

Entering the second half of 2022, MINT expects global tourism to continue its robust recovery. Paired with an expected modest increase in corporate travel, demand for international travel is expected to continue to rise. MINT looks to its European, Australian and Maldives portfolios to continue to deliver standout performances well above pre-pandemic levels, while Thailand is expected to see an acceleration of recovery momentum following the cancellation of all international arrival restrictions in July 2022.

Minor Food’s Thailand business plans to further invest in its brand relevance and drive sales through innovation amidst a strong pick-up in consumer consumption. All restaurants in China resumed dine-in services in July and daily sales climbed quickly following store reopening, albeit with certain limits on seating capacity and minor interruptions from localized COVID-19 cases. The Australia hub is implementing sales initiatives to highlight The Coffee Club’s coffee credentials to enhance brand awareness and identity. In the meantime, MINT will continue to execute its right sourcing strategy to manage raw material costs, as well as optimize stock levels to prevent any supply shortage risk and alleviate potential inflationary impact.

Mr. Dillip Rajakarier, Group CEO of MINT, commented, “I am delighted to report MINT outstanding second quarter performance in-spite of facing external challenges in some of our markets. Our key European, Australian, Middle East and Maldivian hotel hubs all achieved RevPar exceeding pre-COVID-19 levels, highlighting the enduring strength of global hospitality business and MINT’s strategic expansions into these regions over the years. Looking ahead with the strategies we have put in place, we are confident of positive recovery momentum with our strong forward bookings for hotels across markets and our ability to capture resumed demand in our restaurant business. We have already leapt forward to post-pandemic world and we are excited and well-positioned to succeed in the new operating environment with a more efficient business model and a highly-motivated team that is eager to drive continued success.”