Thai Union Group Public Company Limited · SET:TU

Thai Union Group Public — Q3 2017 Earnings Presentation

58 slides from Thai Union Group Public's earnings presentation, Nov 7, 2017

  1. Slide 1: 3Q17 Results Presentation

    3Q17 Results Presentation 7 November 2017 Page 1

  2. Slide 2: Disclaimer

    Disclaimer The information contained in our presentation is intended solely for your personal reference only. In addition, such information contains projections and forward-looking statements that reflect our current views with respect to future events and financial performance. These views are base

  3. Slide 3: Agenda

    Agenda Key Highlights Recent Developments 3Q17 Financial Results Business Outlook Page 3

  4. Slide 4: Agenda

    Agenda Key Highlights Recent Developments 3Q17 Financial Results Business Outlook Page 4

  5. Slide 5: CEO message: USD 8.0bn revenue target by 2020

    “Through organic growth, innovation and M&A efforts, we are committed to the USD 8.0bn revenue target by 2020.” Thiraphong Chansiri President and Chief Executive Officer Page 5

  6. Slide 6: 3Q17: Continued cost control and Red Lobster support profits

    3Q17: Continued cost control and Red Lobster support profits  Record quarterly sales. 3Q17 sales was at a YoY Chg % of sales record level through driven by a product repricing from increased raw material prices  Rising raw material prices. Gross profit margin 35,185 Sales +0.4% (THB mn) remained u

  7. Slide 7: 9M17 Net profit up 6.1% YoY, record 9M sales

    9M17 Net profit up 6.1% YoY, record 9M sales Financial Summary1 9M17 Net Profit (THB million) up 6.1% YoY to Total Sales 9M17 9M16* 101,430 100,660 +0.8% THB 4,617million 9M17 13,656 Gross Profit -11.3% Q1’12 9M16* 15,396 Share price movement Q1’11 20162 20172 Operating 9M17 3,826 (Jan- Dec 16 ) (Ja

  8. Slide 8: 3Q17: Continued overall net profit resilience

    3Q17: Continued overall net profit resilience Total sales (THB mn) GPM NPM 60,000 Raw material prices rising 20.0% 17.3% 16.9% 18.0% 50,000 16.0% 15.9% 14.2% 16.0% 13.8% 14.1% 13.8% 13.4% 13.4% 13.2% 14.0% 40,000 34,401 35,050 33,715 34,818 35,185 32,602 33,333 31,210 31,427 12.0% 30,642 30,000 28,6

  9. Slide 9: Agenda

    Agenda Key Highlights Recent Developments 3Q17 Financial Results Business Outlook Page 9

  10. Slide 10: Recent developments

    Recent developments Awards Recognitions: Jul 2017: Thai Union’s executives awarded the top 3 companies in the Consumer/Staples Oct 2017: Thai Union has been shortlisted as sector in 2017 in the following categories a finalist in the following categories for the • Best CEO – Third Place – Mr. Thiraph

  11. Slide 11: Recent developments

    Recent developments Sustainability: Aug 17: Thai Union, along with the Labour Sep 2017: Thai Union has been Sep 2017: Thai Union encourages Rights Promotion Network Foundation (LPN), included in the Dow Jones Sustainability employees from every business units to recently celebrated the official open

  12. Slide 12: Alibaba and Thai Union partnership

    Alibaba and Thai Union partnership Premium quality seafood through China’s largest e-Commerce network • Jun 2017: MOU with Alibaba group • Jun 2017: Offline event with Yiguo (Tmall super fresh goods operator) to help King Oscar launch in Tmall super • July 2017: King Oscar exclusive channel in Tmall

  13. Slide 13: Delayering European Business Structure

    Delayering European Business Structure Oct: Thai Union is introducing a new Management Committee structure in Europe as part of our global program to harmonize our operations in all of our key regions. Corporate Supply Chain Committee CEO CFO (led by CEO) European Business Supply Chain Regional Busi

  14. Slide 14: Fish oil extraction update

    Fish oil extraction update Fish oil extraction plant at Samut Sakhon Oil refinery plant in Rostock, Germany Page 14

  15. Slide 15: DOJ Investigation update

    DOJ Investigation update Sep: Tri-Union Seafoods LLC received conditional leniency with respect to the Investigation from the US Department of Justice 22 July 2015: Tri-Union received a subpoena from the DOJ to provide relevant information to the DOJ in relation to an antitrust investigation of the

  16. Slide 16: Agenda

    Agenda Key Highlights Recent Developments 3Q17 Financial Results  TU’s Consolidated Results  Results by Business Unit Business Outlook Page 16

  17. Slide 17: CFO message

    “Despite challenging operating environment, we remain committed to deliver solid growth and enhance our shareholders’ value.” Joerg Ayrle Group Chief Financial Officer Page 17

  18. Slide 18: The key take away for 3Q17 results

    The key take away for 3Q17 results • 3Q17 sales at a record THB 35.2bn, despite light demand and weak Top line at record level currencies • At constant exchange rates, sales would have increased 2.1% YoY • Record tuna prices continue to put pressure on profit margin Continuously weak GPM • Four cons

  19. Slide 19: 3Q17: Profitability profile intact amid challenging environment

    3Q17: Profitability profile intact amid challenging environment  Despite the rising tuna prices over the past 12 months, TU’s profitability profile remain largely resilient  Income contribution from investments and prudent FX and tax management support net profit margin improvement Total Sales (TH

  20. Slide 20: Rising tuna prices put pressure on operation

    Rising tuna prices put pressure on operation 3,000 3Q17 2,010 2,500 2Q17 1,763 2,300 1Q17 2Q16 4Q16 1,633 2,100 1,503 3Q16 1,508 1Q16 1,950 1,980 2,000 1,433 1,900 1,257 1,700 1,700 1,690 1,700 1,600 1,610 1,625 1,500 1,500 1,500 1,450 1,450 1,500 1,400 1,400 1,400 1,170 1,000 1,000 500 Jan-16 Feb-1

  21. Slide 21: Focus on FX gain/loss on hedging accounting treatment

    Focus on FX gain/ loss on Hedging accounting treatment  TU has vast majority of sales being denominated in foreign currencies, such as USD, EUR and GBP; TU applies a strict policy in order to hedge these transactions and limit exposure to FX change.  According to the Thai GAAP, the effects from th

  22. Slide 22: 3Q17 A record quarterly sales

    3Q17 A record quarterly sales Sales +0.4% YoY THB mn +1.1% QoQ  3Q17 sales grew by 0.4% YoY to THB 35,185mn (up 4.3% YoY in dollar term to USD1,054mn), 35,050 33,715 34,818 35,185 driven by: 31,427  Ambient seafood business, while seeing product repricing, was facing difficult business environment

  23. Slide 23: As a reminder, we are growing consistently every quarter

    As a reminder, we are growing consistently every quarter Despite the sales seasonality, TU continued to delivered YoY sales growth consistently Total sales (THB mn) 36,000 34,000 32,000 30,000 28,000 26,000 24,000 22,000 20,000 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16* 4Q16* 1Q17 2Q17

  24. Slide 24: 3Q17 resilient sales growth, slowed by the FX impact

    3Q17 resilient sales growth, slowed by the FX impact Revenue growth component (THB million) +0.4% YoY +0.8% YoY +1,420 -1,233 +1,031 -710 +609 -1,032 +719 -268 +234 +12% -4% 101,430 +838 -52 +368 -634 100,660 +4% -15% -3% +3% +9% -3% -342 +2% -1% -125 -37 +170 -18% +8% -50 35,185 35,050 -4% -1% +7%

  25. Slide 25: Growing branded sales mix amid foreign currency volatility

    Growing branded sales mix amid foreign currency volatility Sales Breakdown by Geographic  9M17 Sales contribution in key markets remained 100% stable compared to 2016 sales mix by geography. 14% 13% 14% 13% 14% However, the key changes were seen in the other 80% 8% 7% 6% 6% 6% 7% 7% 8% 8% 10% Other

  26. Slide 26: Gross margin under pressure from high raw material prices

    Gross margin under pressure from high raw material prices 30.0% 28.0% Gross Profit -5.6% YoY 26.0%  3Q17 Gross profit of THB 4,658mn, stable QoQ, THB mn -0.2% QoQ despite continued rising tuna raw material price 24.0% (+14% QoQ to USD2,010/ton). On YoY basis, the 22.0% gross profit was down 5.6% Yo

  27. Slide 27: Operating profit: Strong cost control continued

    Operating profit: Strong cost control continued 15.0% Operating Profit 13.0% -29.5% YoY THB mn -18.9% QoQ 11.0%  3Q17 Operating profit of THB 1,319mn, down 29.5% YoY, driven by rising raw material prices. 9.0%  Due to stringent cost control, 3Q17 normalized 1,871 1,627 7.0% SG&A to sales ratio rem

  28. Slide 28: Stable EBITDA supported by investments

    Stable EBITDA supported by investments 28.0% EBITDA +1.2% YoY THB mn +4.1% QoQ 23.0%  Despite a weak operating profit, TU reported 3Q17 EBITDA of THB 2,990mn, up 1.2% YoY and 18.0% 4.1% QoQ, driven mostly by strong income 2,954 2,899 2,874 2,990 contribution from Red Lobster Investor and 13.0% prud

  29. Slide 29: Resilient net profit growth despite challenging environment

    Resilient net profit growth despite challenging environment 14.0% Net Profit +8.9% YoY THB mn 12.0% +23.1% QoQ  Despite the challenging operating environment, 10.0% 3Q17 net profit of THB 1,737mn, up 8.9% YoY and 8.0% 23.1% QoQ 1,594 1,737  The net profit improvement was driven by: 1,469 1,411 6.0

  30. Slide 30: Normalized net profit increased 15% YoY to THB 1,590mn

    Normalized net profit increased 15% YoY to THB 1,590mn 20.0% Normalized 18.0% Net Profit +14.9% YoY THB mn 16.0%  Excluding the one-off quarter-end items, 3Q17 +15.9% QoQ 14.0% normalized net profit was at THB 1,590mn, 12.0% representing 15% increase YoY 10.0%  One-off positive items during 3Q17 o

  31. Slide 31: EPS: Keeps momentum despite operational headwinds

    EPS: Keeps momentum despite operational headwinds EPS* +8.9% YoY THB +23.1% QoQ  3Q17 EPS was at THB 0.37, up 8.9% YoY and 23.1% QoQ, despite challenging operational headwinds 0.37 0.33 0.31 0.29 0.19 3Q16 4Q16 1Q17 2Q17 3Q17 1.11 +6.1% YoY 1.07 0.98 0.97 0.91 0.60 2012 2013 2014 9M16 9M17 Remark:

  32. Slide 32: Red Lobster is 28% EPS accretive in 3Q17

    Red Lobster is 28% EPS accretive in 3Q17 Lent Period Seasonality Christmas & NYE THB mn 3Q17 2Q17 1Q17 4Q16 Share of -33 -49 203 -118 profit Other Income 247 259 261 240 Finance -134 -136 -127 -102 Q1 Q2 Q3 Q4 Costs Average Fluctuation Income Tax 300 160 -113 39  RL’s contribution during 3Q17 amoun

  33. Slide 33: 3Q17 weak free cash flow amid rising raw material prices

    3Q17 weak free cash flow amid rising raw material prices Quarterly Free Cash Flow THB mn  Despite rising raw material prices, 3Q17 Free cash flow (FCF) remain positive at THB 12mn, 1,586 due mainly to positive contribution from recent investments and improved working capital 786 management -425 12

  34. Slide 34: Debt refinancing secured long-term funding

    Debt refinancing secured long-term funding Interest-bearing debts of THB 67,449mn By Currency By Maturity EUR 1.0% 1.2% USD 23% 1.3% 2018 0.9% Short-term 2% Loan 56% 2019 Current Portion of Long- 2020 THB 97.7% 97.9% term Debt 5% 2% & finance lease 2021 39% 76% onwards Long-term 42% Debt 2016 2Q17 2

  35. Slide 35: 3Q17: Debt profile affected by lower EBITDA, NWC increase and Capex

    3Q17: Debt profile affected by lower than planned EBITDA, NWC increase and Capex, commitment to strong dividend policy Unit: THB mn Operating Activities Investing & Financing Activities ND/E 1.37x THB 5,492mn ND/E 1.37x Kd = 2.74% Kd = 3.21% Free Cash Flow THB 2,384 mn +3,399 -622 66,294 64,942 -8,7

  36. Slide 36: Improving Equity returns

    Improving Equity returns ROE1 INV Days Debt to EBITDA 15.6% 8.33 14.8% 13.5% 12.8% 131 119 119 122 5.59 5.70 5.64 8.4% 108 3.75 3Q16 4Q16 1Q17 2Q17 3Q17 3Q16 4Q16 1Q17 2Q17 3Q17 3Q16* 4Q16* 1Q17 2Q17 3Q17 ROCE2 Net WC3 ND/E4 1.37x 1.34x 1.33x 1.37x 121 10.9% 0.92x 9.3% 114 113 8.1% 8.4% 111 5.8% 107

  37. Slide 37: Agenda

    Agenda Key Highlights Recent Developments 3Q17 Financial Results  TU’s Consolidated Results  Results by Business Unit Business Outlook Page 37

  38. Slide 38: Key operating impact: Raw material prices continued to rise

    Key operating impact: Raw material prices continued to rise due to supply challenge Raw material prices Skipjack tuna raw material prices (USD/ton) 2,500  In Oct, tuna price closed at USD 2,300/ton. In 3Q17, average price 2,300 was at USD 2,010/ton (+40.2% YoY, +14.0% QoQ). 2,000 (Oct’17) 1,500 1,0

  39. Slide 39: Key operating impact: Exchange rate

    Key operating impact: Exchange rate USD/THB 38  In Oct, USD/THB closed at 33.25. In 3Q17, average USD/THB was 36 at 33.39 (-4.2% YoY, -2.7% QoQ) 34 33.25 (Oct’17) 32 30 28 Jan-14 Jan-15 Jan-16 Jan-17 EUR/THB 50  In Oct, EUR/THB closed at 39.07. In 3Q17, average EUR/THB was at 39.20 (+0.8% YoY, +3.

  40. Slide 40: Thai Union's global footprint

    Thai Union’s global footprint Page 40

  41. Slide 41: 3 strategic business segments

    3 strategic business segments Total 9M17 sales: THB 101,430 mn Frozen, chilled seafood PetCare, value added and Ambient seafood Sales: THB 46,276 mn and related others Sales: THB 41,628 mn Sales: THB 13,526 mn Shrimp & related Tuna business PetCare business1 Ambient & Pouch Frozen, chilled & Value-a

  42. Slide 42: Ambient Seafood

    Ambient Seafood cS , Gatz art (9h 222 roorpaisr ance 1) comsnarion

  43. Slide 43: Ambient Seafood: Business outlook stabilizing

    Ambient Seafood Business outlook stabilizing Sales (THB million) Quantity (Tons) +2.4% YoY -0.3% YoY -3.3% QoQ -3.1% QoQ 20,000.00 120,000.00 119,000.00 118,000.00 117,000.00 19,000.00 18,000.00 15,461 16,371 15,836 116,000.00 115,000.00 114,000.00 113,000.00 112,000.00 111,000.00 110,000.00 109,000

  44. Slide 44: Frozen, chilled seafood and related

    Frozen, chilled seafood and related Page 44

  45. Slide 45: Frozen, chilled seafood and related: Resilient business outlook

    Frozen, chilled seafood and related Resilient business outlook Sales (THB million) Quantity (Tons) -2.4% YoY +4.9% YoY +5.9% QoQ +8.1% QoQ 90,000.00 89,000.00 88,000.00 20,000.00 87,000.00 86,000.00 19,000.00 85,000.00 84,000.00 83,000.00 82,000.00 18,000.00 17,000.00 15,138 15,317 14,770 81,000.00

  46. Slide 46: PetCare, value-added and others

    PetCare, value-added and others Page 46

  47. Slide 47: PetCare delivering solid operational performance

    PetCare, value-added and others PetCare delivering solid operational performance Sales (THB Million) Quantity (Tons) +2.9% YoY +6.1% YoY +1.7% QoQ +4.3% QoQ 6,000.00 50,000.00 49,000.00 48,000.00 4,451 4,546 4,444 4,502 4,580 47,000.00 46,000.00 45,000.00 36,247 36,884 38,454 5,000.00 44,000.00 43,0

  48. Slide 48: 9M17 Segment Profitability

    9M17 Segment Profitability Sales Margin Gross Profit New segment (THB million) (%) (THB million) Ambient seafood 46,276 15.6% 7,197 *Tuna business *Sardine & Mackerel *Ambient & Pouch Salmon Gross Profit Frozen, chilled seafood and 41,628 9.3% 3,855 THB 13,656 million related *Shrimp & related busin

  49. Slide 49: Agenda

    Agenda Key Highlights Recent Developments 3Q17 Financial Results Business Outlook Page 49

  50. Slide 50: Company outlook: What is key over the next months?

    Company outlook: What is key over the next months?  Continued emphasis on Cost control Initiatives and structural cost reduction (Europe, US regional office, Shared Services)  Focused productivity program to close gap in underperforming plants and manage Capex to drive unit cost reduction  Achiev

  51. Slide 51: Appendix

    ia Thai Page St ® Union

  52. Slide 52: Share Capital Information

    Share Capital Information Stock Information Major Shareholders Bloomberg/ Reuters TU TB/ TU.BK As of 29 September 2017 Share price (3 Nov 2017) : THB 17.90 Historical price : Chansiri Family 52-week high THB 22.70 20.8% 52-week low THB 17.70 No. of paid up shares : 4,771.82mn Niruttinanon Par value

  53. Slide 53: 3Q17 Income Statement

    3Q17 Income Statement Consolidated 3Q17/ 3Q17/ % % % (Unit: THB mn) 3Q17 3Q16** 2Q17 3Q16 3Q17 to sales to sales to sales Change Change Sales 35,185 100% 35,050 100% 34,818 100% 0.4% 1.1% Cost of sales (30,528) -86.8% (30,113) -85.9% (30,149) -86.6% 1.4% 1.3% Gross profit 4,658 13.2% 4,937 14.1% 4,6

  54. Slide 54: 9M17 Income Statement

    9M17 Income Statement 9M17/ % % (Unit: THB mn) 9M17 9M16** 9M16 to sales to sales Change Sales 101,430 100% 100,660 100% 0.8% Cost of sales (87,773) -86.5% (85,264) -84.7% 2.9% Gross profit 13,656 13.5% 15,396 15.3% -11.3% SG&A expenses (9,830) -9.7% (9,826) -9.8% 0.0% FX gain (loss) 905 0.9% 266 0.

  55. Slide 55: Statement of Financial Position as of 30 September 2017

    Statement of Financial Position as of 30 September 2017 % to total % to total (Unit: THB mn) 9M17 2016 Change assets assets Cash and cash equivalents* 1,098 0.7% 976 0.7% 12.5% Trade and other receivables - net 18,109 12.3% 16,412 11.5% 10.3% Inventories - net 42,155 28.6% 39,626 27.8% 6.4% Other cu

  56. Slide 56: 9M17 Statement of Cash Flow

    9M17 Statement of Cash Flow Consolidated (Unit: THB mn) 9M17 9M16 Change Profit before income tax 5,083 5,695 (611) Adjustments for depreciation & amortisation expenses 2,038 2,207 (169) Other adjustments 913 981 (068) Changes in operating assets and liabilities (1,844) (475) (1,369) Cash flows rece

  57. Slide 57: Historical dividend payment

    Historical dividend payment Interim dividend for the period: 1 Jan 17 to 30 Jun 17 DPS THB 0.32 XD 18 August 2017 Book closing date 23 August 2017 Payment date 4 September 2017 THB/Share 0.70 59.9% 0.60 56.7% 53.5% 57.2% 53.3% 50.1% 50.4% 50.6%50.7% 50.0% 51.3% 50.5% 0.50 0.40 29.4% 0.31 0.31 0.25 0

  58. Slide 58: Thank you

    Thank you Corporate website: http://www.thaiuniongroup.com IR website: http://www.thaiuniongroup.com/en/investor.ashx E-mail: ir@thaiunion.com Tel:58+66 2298 0024 Page

Thai Union Group Public Company — Q3 2017 Earnings Presentation on 6ix