Thai Union Group Public Company Limited · SET:TU
Thai Union Group Public — Thai Union Group PCL — Q3 2019 Earnings Presentation
68 slides from Thai Union Group Public's earnings presentation, Nov 6, 2019
Slide 1: 3Q19 Analyst Meeting
3Q19 Analyat Meaning Thai Union Group PCL. 6 November, 2019
Slide 2: 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 based on assump
Slide 3: Thai Union's 3Q19 key highlights
rs Thai Union’s 3Q19 key highlights
Slide 4: CEO message on product diversification
«6 Thai Union remains focused on product diversification for long- term growth, and committed to continuous improvements and the streamlining of our operations to help limit pressure on our margins. 33 Thiraphong Chansiri President and CEO
Slide 5: 3Q19 sales, gross profit, operating and net profit
(THB mn) Sales Gross Profit Operating Net Profit Profit 31,838 5,077 1,516 1,374 Sales dropped on lower raw Non-operating items stable material prices and currencies YoY GPM of 15.9%, up 10bps YoY Depressed from lower sales YoY 3Q19 sales down 1.3% YoY Gross profit value down on Operating profit dow
Slide 6: 9M19 net profit financial summary
9M19 Net Profit Financial Summary1 9M18 9M19 up 4.8% YoY to (THB million) -4.0% THB 4,160 million +9.5% 97,273 93,421 14,822 Share price movement 13,536 +11.5% 20182 20192 (Jan – Dec 18) (Jan – 4 Nov 19) 9,271 -21.7% -14.2% +4.8% 8,313 +29.5% ND/E slightly increased mostly 3,968 4,160 4,105 due to F
Slide 7: Quarterly sales, GPM and NPM trend
Total sales (THB mn) GPM NPM 16.7% 18.0% 60,000 15.8% 15.9% 14.8% 14.5% 14.9% 14.9% 16.0% 14.2% 13.8% 14.0% 50,000 14.0% 11.6% 12.0% 40,000 34,400 34,733 33,775 34,169 36,012 34,847 32,214 31,838 30,958 29,369 10.0% 30,000 29,329 8.0% 4.6% 4.9% 5.1% 4.7% 6.0% 20,000 4.1% 4.1% 4.1% 4.3% 4.3% 3.0% 3.4
Slide 8: Thai Union Highlights
hai Union
Slide 9: John West Not Guilty verdicts
• John West announced that Not Guilty verdicts were declared on doing business directly connected to illegal, unreported and unregulated (IUU) fishing. • CPS offered no evidence against John West, the Court entered verdicts of Not Guilty on all counts. • This conclusion is a positive proof of Thai U
Slide 10: THB 6bn senior debentures issued
Photo Caption (from left to right): 1.Mr. Anuwat Ruamsuke, Managing Director, Head of Capital Markets Department, Phatra Securities 2.Mr. Narin Opamuratawongse, Executive Vice President and Manager, Investment Banking Division, BBL 3.Mr. Thiraphong Chansiri, CEO of Thai Union Group 4.Mr. Joerg Ayrle
Slide 11: USTR GSP eligibility revocation
• On 25 October, 2019, USTR announced it will revoke GSP eligibility for some Thai seafood imports to USA • As a result, these goods will face increased tariffs, effective in six months. • Due to specific classifications, Thai Union’s key import products to US (tuna and shrimp) do not benefit from G
Slide 12: Venture fund for food-tech start-ups
• Thai Union announced • Produces insect larval foundation of venture fund protein into sustainable, as part of continuous nutritious alternative protein investment in innovation • Potential applications across feed, pet care, human food • The fund received an initial and ingredients commitment of U
Slide 13: Sustainability and social initiatives
• Thai Union and Charoen Pokphand Foods issued a joint statement on tackling modern slavery to ensure their supply chains are free of illegal labor at the annual Seafood Business for Ocean Stewardship (SeaBOS) Dialogue meeting. • In September 2019, Thai Union announced a Combating Food Fraud and Foo
Slide 14: Sustainability index rankings and awards
• This marks as second year in a row which Thai Union has been named as industry leader. • Thai Union has now been listed for six consecutive years, driven by its global sustainability strategy, SeaChange®. • Thai Union has been ranked No. 1 on inaugural Seafood Stewardship Index (SSI), which assess
Slide 15: Recognition for management and investor relations
• Thai Union was recognized for its outstanding work in following categories: • Best CEO (Thailand): Thiraphong Chansiri, CEO – for leadership in driving innovation to create new S-curve industries and bringing Thai Union to a new frontier in seafood industry. • Best Group CFO (Thailand): Joerg Ayrl
Slide 16: Thai Union Feedmill PCL.
Thai Union Feedmill PCL. Mr. Rittirong Boonmechote, Executive Chairman of Board Mr. Bunluesak Sorajjakit, Chief Executive Officer Ms. Ura Pavasuttinon, Chief Financial Officer Mr. Paco Lee, General Manager - Business Development (Global Frozen and Related)
Slide 17: Thai Union Feedmill overview and IPO
• Thai Union Feedmill (TFM), a leading aqua feed producer in Thailand, has been one of the most consistently performing members of Thai Union +4.8% Group since its inception in 2000. 4,410 4,018 4,251 +8.7% • In 6M19, the firm’s sales grew 8.7% YoY, driven by its seabass feed, while its annual sales
Slide 18: Feedmill sales breakdown and R&D
Sales breakdown by main category • One of TFM’s strengths lie in its industry-leading R&D efforts in aquafeed formulation, feed development for new species, exploring new alternative ingredients, and 2018 developing new farming techniques to support farmers Others 2.3% • Profeed Turbo is a premium q
Slide 19: Indonesia feed JV with PT MSK
TFM • Established a JV subsidiary with PT MSK (founded by prominent Indonesian 65.0% seafood business partners) and our Indian partner Avanti Feeds TUKL • A land plot has been acquired near the city of Surabaya with construction Paid-up capital : Rupiah 133,980 million starting soon. It is expected
Slide 20: Acquisition of additional stake in Thammachart Seafood
1 Rebrand Qfresh to be under TSR, offering • Thai Union will acquire an additional premium frozen seafood to Thai consumers 39.9% shares into Thailand’s leading premium seafood importer and restaurant 2 Strengthen presence in Thai retail market operator, Thammachart Seafood (TSR). through Qfresh • A
Slide 21: Thammachart Seafood
thammachart seafood _ y SSSUDIA BWA => FOOD SERVICE
Slide 22: Our Story
OUR STORY Thammachart Seafood travels the world, bringing to you, every possible blissful eating experience the mighty oceans have to offer! From the North Atlantic to the Southern Pacific, we deliver! Orderly ‘aquaculture’ is crucial; helping communities to prosper while producing the healthiest of
Slide 23: Thammachart Seafood at a glance
+1200 +110 +361 +12 +25 +33 +86 +48 +45 THAMMACHART SEAFOOD 2 3
Slide 24: The best seafood the world has to offer
THE BEST SEAFOOD THE WORLD HAS TO OFFER Norway Alaska Scotland Ireland Holland France USA Italy Japan Spain Atlantic Pacific Ocean Ocean Thailand Pacific Ocean Indian Ocean SALMON &TROUT CRAB PREMIUM FISH LOBSTER (EUROPE) Australia NewZealand LOCALFISH SHRIMP &PRAWN LIVEOYSTER SQUID & OCTOPUS MUSSEL
Slide 25: Selection, traceability and delivery
Selection: Traceability: Storage-Temperature Controlled: Guaranteed Freshness: Customization: Delivery: SUSTAINABILITY & TRACEABILITY LABELS THAMMACHART SEAFOOD 2 5
Slide 26: Our customers & partners
Our customers & partners a \K THE PENINSULA PENINSULA The Oura Prestige WALDORF ASTORIA MANDARIN ORIENTAL “HOTELS — BANGKOK HOTELS & RESORTS THE HOTEL GROUP, lebua sorire. WESTIN — string Bhiamande CENTARA bese owes HOTELS & RESORTS 4 &, AA pullmanq S QD uiimar MARRIOTT abanon ANANTARA SOHO HOSPITAL
Slide 27: Our customers & partners
Our customers & partners FOOD SERVICE < Conrad Bangkok Sponsored -@ all over again! THB 1,250 (inc! each) 02.680 9211 fl bitsvicate2conradbkk H#Oysters HOysterLover #internationalRestaurant ‘#B.angkok #EatDrinkHilton #BangkokRestaurant #Cafe@2 #ConradBangkok OOD" AION > 7
Slide 28: Customer testimonial
“Thammachart Seafood provide us the highest quality and the service. They are expert on the seafood ‘’ THAMMACHART SEAFOOD 2 8
Slide 29: Sales contribution by category and customer
Sales Contribution by Category Sales Contribution by Customer Mussel & Local Seafood Clams Others Specialty 3% 3% Wholesaler 4% 3% 5% Shellfish 5% 20% 46% Premium Imported Fish Salmon & Trout 29% 61% Restaurant Hotels 21% Live Oyster THAMMACHART SEAFOOD 2 9
Slide 30: Consolidated Results
Consolidated Results Thai Union
Slide 31: CFO message on trade laws
£6 At Thai Union, we continue to monitor possible changes or implications of international trade laws and legal front to evaluate and mitigate any potential impacts to our business. LB) Joerg Ayrle, Group CFO rN Thai | Union
Slide 32: 3Q19 results summary
Challenged sales, • 3Q19 reported sales declined 6.8% YoY due to depreciation of key trading currencies vs THB, GBP (-12% YoY), EUR (-11%) and USD (-6.9%). mostly due to FX • Ex-FX, TU sales -1.3% YoY due to declines in Thai ambient operations and EU Solid organic • 3Q19 sales volume continued to gr
Slide 33: Tuna raw material price
Tuna raw material price (USD/ton) 2,400 2,200 2,000 1,800 1,600 3Q17 4Q17 1,400 2,033 2Q17 2,010 1Q17 2Q18 1,763 1Q18 1,200 2Q16 3Q16 4Q16 1,633 1,667 3Q18 1Q19 1,503 1,508 1,577 4Q18 1Q16 1,433 1,467 1,408 1,453 2Q19 3Q19 1,000 1,257 1,217 1,217 900 800 Nov-16 Dec-17 Jun-16 Sep-16 Dec-16 Jun-17 Oct
Slide 34: Sales trend
-1.3% YoY Sales Before currency THB mn -6.8% YoY impacts -1.2% QoQ • 3Q19 sale declined 1.3% YoY, excluding 36,012 40,000 FX impact, driven by: 34,169 32,214 31,838 35,000 ✓ Reported sales saw decline mainly 29,369 30,000 from key trading currencies 25,000 depreciation against THB GBP (-12% 20,000 Y
Slide 35: Revenue growth component
Revenue growth component THB mn -6.8% YoY 34,169 -1,629 191 -846 45 -180 244 188 424 +3% +10% +14% -10% +10% -1,059 254 73 -36 +9% -14% +5% -7% -12% +11% 31,838 -1.3% YoY Before currency -11% impacts Tuna Sardine Salmon- Other Shrimp Salmon- Lobster Other Pet Care Value USD EUR 3Q18 & Ambient seafoo
Slide 36: Sales breakdown by geography and business
Sales Breakdown by Geographic 100% 14% 13% 14% Others • 9M19 Sales contribution in key markets 15% 15% 6% 6% 6% 6% 5% Japan shifted in favor of domestic market. 80% 8% 8% 9% 11% 13% Domestic ✓ TU focused on domestic market, 60% resulted in 19% sales growth YoY. 29% 33% 31% 31% 30% Europe ✓ US and Eu
Slide 37: Gross profit
Gross Profit 30.0% THB mn 28.0% -6.1% YoY 26.0% -5.4% QoQ 24.0% • 3Q19 Gross profit margin slightly 5,406 5,356 5,364 5,077 22.0% improved YoY, although challenged 4,382 20.0% sales pressure gross profit, 16.7% 15.9% 18.0% ✓ Frozen business delivered margin 15.8% 14.9% 14.9% 16.0% improvement to 11.
Slide 38: Operating profit
20.0% Operating Profit 18.0% THB mn 16.0% -18.8% YoY -3.4% QoQ 14.0% • 3Q19 Operating profit was at THB 12.0% 1,516mn: 1,867 1,570 1,516 10.0% ✓ Lower gross profit from challenged 1,499 8.0% sale 1,020 6.0% ✓ SG&A expenses stable on absolute OP Margin 5.5% 4.9% 4.8% 4.0% basis (+0.6% YoY) 4.2% 3.5%
Slide 39: EBITDA
28.0% EBITDA THB mn -2.2% YoY 23.0% -2.7% QoQ • 3Q19 EBITDA at THB3.2bn, a slight 18.0% decline of 2.2% YoY, 3,271 3,254 3,182 ✓ The slight decline despite weaker 2,818 2,703 operating profit trajectory was 13.0% supported an increased other EBITDA 10.2% 10.0% 8.0% income and share of profit. The 9.
Slide 40: Net profit
14.0% Net Profit THB mn 12.0% -20.6% YoY 10.0% • With a challenged revenue in 3Q19, -9.2% QoQ TU’s 3Q19 net profit was at THB 1,374mn. 8.0% 1,731 1,513 1,374 6.0% • On reported basis, 3Q19 net profit was 5.1% 1,223 1,273 up 4.8% NPM 4.3% 4.7% 4.3% 4.0% • Non-operating was a mixed bag, but 3.4% 2.0%
Slide 41: Adjusted net profit
20.0% Adjusted Net Profit 18.0% THB mn -20.6% YoY 16.0% • There is no one-time or non-operating 14.0% item during 3Q19 -20.0% QoQ 12.0% • On reported basis, however, the 3Q19 net 1,731 1,718 10.0% profit of THB 1,374mn represented 4.8% Adjusted 1,374 8.0% growth YoY from 3Q18 reported net profit 1,2
Slide 42: Earnings per share
Earning per Share (EPS)* THB -20.6% YoY -9.2% QoQ • 9M19 normalized EPS was at THB 0.87, 0.36 up 4.8% YoY, along with the net profit 0.32 trajectory. 0.27 0.29 0.26 3Q18 4Q18 1Q19 2Q19 3Q19 1.26 1.11 1.10 1.09 0.83 0.87 +4.8% YoY 2015 2016 2017 9M18 9M19 Remark: Excluding one-time net accrual for US
Slide 43: Red Lobster contribution to net profit
Red Lobster has contributed THB 132mn to net profit in 3Q19 3Q19 2Q19 1Q19 4Q18 3Q18 THB mn • 3Q19 guest count recently challenged Share of • TU still benefit from a stable interest -34 -9 144 -201 64 profit income, which result in a net profit contribution of THB132mn during Other 242 249 249 258 2
Slide 44: Quarterly free cash flow
Quarterly Free Cash Flow THB mn • 3Q19 free cash flow was at THB 1.1bn, which was stable from over the 2,186 past 3 quarters despite weak headline 1,052 1,259 revenue 1,178 1,085 3Q18 4Q18 1Q19 2Q19 3Q19 Cash Conversion 0.91 0.77 0.68 0.59 0.67 Rate1 Annual Free Cash Flow THB mn 8,401 5,544 Remark:
Slide 45: Net debt and free cash flow bridge
Unit: THB mn ND/E 1.39x Free Cash Flow THB 3,523 mn Income tax paid and other investing & financing activities ND/E 1.43x Kd = 3.20% Kd = 3.13% 1.35x before adoption of TFRS 9 and 16 64,374 2,153 64,398 1,419 1,908 3,375 148 -160 Cash dividend paid in 2019 192 257 67 -7,413 EBITDA Change in net Chan
Slide 46: Net debt and equity movement
Unit: THB mn +0.0% 1,908 220 64,398 64,374 1,419 YTD debt remained stable -3,523 Net Debt Free cash flow Net interest Dividend paid Others Net Debt as of paid to TU as of 1 Jan 2019 shareholders 30 Sep 2019 -2.8% 2,759 Balance sheet 46,172 -1,908 351 45,179 translation -2,195 shrink amid strong Baht
Slide 47: Interest-bearing debt by currency and maturity
Interest-bearing debts of THB 65,226mn By Currency By Maturity EUR 1.7% 1.4% USD 21% 23% Short-term loan 0.0% Current portion 14% of long-term debt & finance lease 16% 2021 THB 2023 98.3% 98.6% onwards Long-term debt 65% 61% 2022 2018 3Q19 2018 3Q19 Long-term loan by maturity THB 64.5bn THB 65.2bn T
Slide 48: ROE, inventory days, net debt to EBITDA
ROE1 INV Days Net Debt to EBITDA 16.2% 14.1% 13.0% 11.5% 11.8% 135 125 125 5.95 5.63 124 4.92 4.85 5.06 115 Target 39,996 38,371 36,859 37,126 36,951 4.0-4.5 3Q18 4Q18 1Q19 2Q19 3Q19 3Q18 4Q18 1Q19 2Q19 3Q19 3Q18 4Q18 1Q19 2Q19 3Q19 INV (THB mn) INV Day ROCE2 Net WC3 ND/E4 118 109 107 109 100 9.9% 9
Slide 49: Results by Business Units
c Results by Business Units Thai ® Union a
Slide 50: Raw material prices: tuna, shrimp, salmon
Tuna raw material price (USD/ton) In October 2019, raw material prices closed at: 2,400 • Tuna - USD 900/ton 2,200 Price continued its downtrend • Shrimp - THB 134/kg 2,000 to lowest level since 2015 • Salmon - NOK 51/kg 1,800 1,600 4Q17 In 3Q19, average raw material prices closed at: 3Q17 2,033 1,4
Slide 51: Currency trends: USD, EUR, GBP vs THB
Risk Risk USD/THB EUR/THB 38.0 factor factor Continues to decline 41.0 36.0 against THB after gaining Continued 40.0 depreciation with strength in 2018 39.0 recent sharp decline 34.0 38.0 1Q17 37.0 32.0 2Q17 3Q17 4Q17 1Q18 3Q18 35.12 34.30 3Q17 4Q17 3Q18 4Q18 36.0 1Q17 2Q17 39.20 38.78 38.78 2Q18 38
Slide 52: Total 9M19 sales by business
Total 9M19 sales: THB 93,421 mn Ambient seafood Frozen, chilled seafood and related PetCare, value-added and others Sales: THB 41,954 mn Sales: THB 37,732 mn Sales: THB 13,735 mn Tuna Tuna slices Shrimp and related 1 Lobster PetCare Marine ingredients Sardine & mackerel Ambient and pouch salmon Froz
Slide 53: Ambient seafood results
Sales (THB million) Quantity (Tons) -13.9% YoY -3.1% YoY +3.1% QoQ +15.8% QoQ 120,000.00 119,000.00 118,000.00 117,000.00 116,000.00 115,000.00 20,000.00 16,806 114,000.00 113,000.00 112,000.00 111,000.00 110,000.00 109,000.00 108,000.00 93,236 88,841 78,018 90,353 19,000.00 107,000.00 106,000.00 10
Slide 54: Frozen and chilled seafood results
Sales (THB million) Quantity (Tons) -2.0% YoY +15.2% YoY -5.0% QoQ 120,000.00 119,000.00 118,000.00 117,000.00 116,000.00 115,000.00 114,000.00 113,000.00 112,000.00 111,000.00 110,000.00 109,000.00 108,000.00 107,000.00 106,000.00 +6.7% QoQ 20,000.00 105,000.00 104,000.00 103,000.00 102,000.00 101,
Slide 55: PetCare and value-added results
Sales (THB million) Quantity (Tons) +6.3% YoY +2.6% YoY -3.0% QoQ +2.0% QoQ 5,367 73,769 67,838 67,508 68,874 6,000.00 67,126 4,384 4,747 4,604 80,000.00 79,000.00 78,000.00 77,000.00 76,000.00 75,000.00 5,000.00 4,332 7% 74,000.00 73,000.00 72,000.00 71,000.00 70,000.00 69,000.00 68,000.00 7% 4% 5%
Slide 56: Sales by region
31% Europe 38% United States 13% and Canada Thailand 18% Others (Asia, Australia, Middle East, Africa and South America)
Slide 57: North America sales
Sales THB mn -5.1% YoY -5.1% QoQ 20,000 15,192 18,000 16,000 14,000 12,801 12,207 12,792 12,143 12,000 10,000 8,000 6,000 4,000 2,000 - 3Q18 4Q18 1Q19 2Q19 3Q19 • 3Q19 North America sales declined by 5.1% in Thai Baht term. ✓ USD depreciated 6.9% YoY vs Baht ✓ Excluding FX impact, Sales in the US on
Slide 58: Europe sales
Sales THB mn -9.9% YoY 20000 18000 +0.9% QoQ 16000 14000 10,890 10,503 9,813 12000 9,726 10000 8,198 8000 6000 4000 2000 0 3Q18 4Q18 1Q19 2Q19 3Q19 • 3Q19 EU sales declined 9.9% YoY, ✓ EUR (-11% YoY) and GBP (-12% YoY) depreciation against Thai Baht YoY, ✓ Excluding FX impact, EU sales was increasin
Slide 59: Thailand sales
Sales THB mn 20000 18000 16000 14000 +18.5% YoY 12000 +5.8% QoQ 10000 8000 6000 3,379 4,242 3,853 3,785 4,003 4000 2000 0 3Q18 4Q18 1Q19 2Q19 3Q19 • 3Q19 Thailand sales up 18.5% YoY. • Diversifying sales in home market partly offset weaker export market from THB appreciation against key currencies •
Slide 60: Other markets sales
Sales THB mn -17.2% YoY 20000 18000 16000 14000 -0.5% QoQ 12000 10000 7,099 8000 6,075 5,911 5,879 6000 5,111 4000 2000 0 3Q18 4Q18 1Q19 2Q19 3Q19 • 3Q19 sales was at THB 5.9bn, down 17.2% YoY mainly driven by the weak sales to Middle East, attributable to both the falling tuna prices and lower sale
Slide 61: Business segment sales and margin
Sales Margin Gross profit Business segment THB million % THB million Ambient seafood • Tuna 14,466 18.0 2,609 • Sardine and mackerel • Ambient and pouch salmon Frozen, chilled seafood and related • Shrimp and related 1 12,768 11.4 1,450 • Lobster • Frozen, chilled and smoked salmon • Other seafood2
Slide 62: Thai Union Group PCL.
Thai Union Group PCL. « Thai x Union
Slide 63: Appendix
Appendix » << ee | ae Slide 63 3Q19 Analyst Meeting
Slide 64: Stock performance, major shareholders, dividend policy
Stock Performance at a Glance Major Shareholders Bloomberg/ Reuters TU TB/ TU.BK As of 30 September, 2019 Share price (4 November, 2019) THB 13.90 Others Historical price 50.0% 52-week high THB 17.00 Chansiri Family 19.5% 52-week low THB 16.60 No. of paid up shares 4,771.8mn Par value THB 0.25 Marke
Slide 65: Consolidated income statement
Consolidated 3Q19 3Q19 % % % (Unit: THB mn) 3Q19 3Q18* 2Q19 3Q18 2Q19 to sales to sales to sales Change Change Sales 31,838 100% 34,169 100% 32,214 100% -6.8% -1.2% Cost of sales (26,762) -84.1% (28,762) -84.2% (26,850) -83.3% -7.0% -0.3% Gross profit 5,077 15.9% 5,407 15.8% 5,364 16.7% -6.1% -5.4%
Slide 66: Balance sheet
% to total % to total (Unit: THB mn) 3Q19 2018 Change assets assets Cash and cash equivalents* 829 0.6% 1,586 1.1% -47.7% Trade and other receivables - net 15,462 11.1% 15,968 11.2% -3.2% Inventories - net 36,951 26.5% 38,371 26.9% -3.7% Other current assets 3,214 2.3% 3,086 2.2% 4.2% Total current
Slide 67: Cash flow statement
Consolidated (Unit: THB mn) 9M19 9M18 Change Profit before income tax 3,097 2,542 555 Adjustments for depreciation & amortisation expenses 2,717 2,180 536 Other adjustments 1,407 2,195 (787) Changes in operating assets and liabilities (324) 4,156 (4,479) Cash flows receipts from operating activities
Slide 68: Investor relations contact
+66 2298 0024 ir@thaiunion.com investor.thaiunion.com @irthaiunion