Thai Union Group Public Company Limited · SET:TU
Thai Union Group Public — Thai Union Group PCL — Q2 2023 Earnings Presentation
65 slides from Thai Union Group Public's earnings presentation, Aug 8, 2023
Slide 1: Analyst Meeting for 2Q23 Results
Analyst Meeting for 2Q23 Results Thai Union Group PCL. Aug 8, 2023
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
Slide 3: 2Q23 Key Highlights
2Q23 Key Highlights
Slide 4: CEO quote on better 2Q23 momentum
“ 2Q23 is showing better momentum from operating profit improving from the bottom in Q1, especially Ambient business, with a healthier GPM. Despite soft net profit in 1H23, Thai Union is bringing a highly attractive dividend payout ratio at 70% ” Thiraphong Chansiri President and CEO Slide 4
Slide 5: 2Q23: Better momentum from core performance improving YoY
2Q23: Better momentum from core performance improving YoY with a healthier operating profit THB mn Sales Gross Profit Operating Profit Net Profit 34,057 5,748 1,777 1,029 Still impacted by inventory GPM at 16.9%, stable compared NP slightly increased from OP rose 8.2% YoY destocking & US rightsizing
Slide 6: 2Q23 Net profit bridge
2Q23 Net profit dropped YoY, mainly impacted by i-Tail dilution and lower FX gain/loss, offset by improved OP and RL Bridge Net Profit THB mn 2,000 +369 -748 1,624 -289 +135 1,500 1,335 -85 -25 1,029 +48 1,000 500 0 2Q22 Reported i-Tail dilution 2Q22 NP with OP Net RL's Lower FX Higher finance Lower
Slide 7: 1H23: Soft performance due to high baseline
1H23: Soft performance due to high baseline in 1H22, soft demand, and logistic normalization 1H23 sales dropped 11.3% -11.3% Financial Summary1 YoY to (THB million) 75,217 THB 66,709mn 66,709 1H22 1H23 -17.6% Share price movement2 2022 1H23 12,939 (Jan – Dec 22) (Jan – Jun 23) 10,664 -13.6% -14.6% -
Slide 8: 1H23 interim dividend of THB 0.30/share
TU announced 1H23 interim dividend of THB 0.30/shares, bringing a highly attractive dividend payout ratio at 70% THB/Share 1.00 0.90 Interim dividend for the period: 0.80 January 1 to June 30, 2023 70% 0.70 DPS THB 0.30 60% 59% 60% 58% 57%57% 57%57% 0.60 53% 51%51% 51% 52% Ex-Dividend Date August 21
Slide 9: Share buyback programs completed
Thai Union completed two share Buy Back Programs, demonstrating management confidence and targeted to build trust from markets TU Group Share Buyback Program Summary An additional investment in ITC Summary Announcement 16 December 2022 Announcement 8 May 2023 Date Date Repurchase Date 3 Jan – 30 Jun
Slide 10: Blue Finance sustainability KPIs
Blue Finance – Achieved 3 sustainability KPIs/targets in 2022, triggering approx. $ 0.2mn/year interest saving Our 2025 Blue Portfolio target on long- 1st ever Blue Finance Portfolio* in Thailand term financing (USD 1.4bn or THB 45bn) Long-term financing USD ~800mn or THB ~27bn in 2021 with 3 KPIs 2
Slide 11: New and innovative product launches
New and innovative product launches TU’s factory in Portugal inaugurates factory store John West’s new plant-based tuna salads with own product line • Two new flavors: Indian and Harissa • Officially inaugurated our own product line “Peniche • 100% recyclable packaging and no artificial ingredient C
Slide 12: Healthy Living, Healthy Oceans
Committed to protecting the environment and supporting local communities, as part of “Healthy Living, Healthy Oceans” As part of Thai Union’s commitment to Healthy Oceans, employees from across Thailand, Europe and Thai Union is proud to be the first John West announced innovative Africa volunteered
Slide 13: Awards & Recognitions
Awards & Recognitions We are proud of the awards we won and the recognition we gained Student Most Attractive People’s Food Awards 2023 ASEAN Risk Awards 2023 Employers Thailand 2023 The winner of TU is one of the top 50 Environmental & Social Risk organizations in Thailand to Genova Calabrian Chili
Slide 14: SeaChange 2030 $200mn commitment quote
“ With SeaChange® 2030, we are dedicating $200mn, which is equivalent to the 2022 net profit, in resources over the next 8 years. This will enable us to demonstrate our leadership position to customers, stakeholders, employees, and the public ” Adam Brennan Global Director, Sustainable Development S
Slide 15: SeaChange 2030
SeaChange® 2030 is our sustainability plan to help reshape the seafood industry with solutions for People and Planet that better sustain a future for all. 15
Slide 16: Launching SeaChange 2030 with USD 200M
Launching SeaChance® 2030 with more ambitious goals across more impact areas Retain Industry’s Leader License to Operate USD 100M A sizable expansion USD 200M Must for long-term business For 2016-2020 For 2023-2030 Support our key customers Improve operating efficient 16
Slide 17: Commitments address UN Sustainable Development Goals
Our 11 commitments address 10 United Nations Sustainable Development Goals We are expanding our impact focus to include 10 Sustainable Development Goals. 17
Slide 18: SeaChange 2030 impact for people and planet
SeaChange® 2030 will focus on driving impact that: Restores & Protects Restores & Protects Communities Ecosystems FOR OUR FOR OUR PEOPLE PLANET To protect the safety, dignity and well- To see our environment being of our communities, workers, begin to recover from the and consumers. climate crisis.
Slide 19: Five key future outcomes
We will set new standards and build momentum for our industry across 5 key future outcomes. Restore & Protect Communities Restore & Protect Ecosystems FOR OUR PEOPLE FOR OUR PLANET 19
Slide 20: 11 commitments for People & Planet
Our 11 commitments cross multiple future outcomes for People & Planet. Path to Net Zero Responsible Responsible Emissions Wild Caught Seafood Aquaculture Ocean Plastics Sustainable Best-in-Class Responsible Ecosystem Reduction Packaging Manufacturing Agriculture Restoration Safe, Decent and Nutritio
Slide 21: KPIs and action plans by 2030
We have KPIs and action plans to meet each commitment by 2030. 1. PATH TO NET 4. OCEANS PLASTIC 7. RESPONSIBLE 10. NUTRITION ZERO EMISSIONS REDUCTION AGRICULTURE & HEALTH DOWNLOAD DOWNLOAD DOWNLOAD DOWNLOAD 2. RESPONSIBLE 5. SUSTAINABLE 8. ECOSYSTEM 11. CORPORATE WILD CAUGHT PACKAGING RESTORATION CI
Slide 22: SeaChange 2030 ocean plastics reduction
CHANGE 2030 SeaChange’ 2030 Is our sustainability plan to help reshape the seafood industry with solutions for People and Planet that better sustain a future for all. (© INTEGRATED APPROACH Building upon our partnership with the Global Ghost Gear Initiative in 2018, Union »pllfy! a positive ir 9 the
Slide 23: Activating our ecosystem of stakeholders
We will activate our entire ecosystem of stakeholders to ensure successful delivery. Happier consumers Sustainable industry Thriving planet Collaborative NGOs Healthier people Strengthened customers Resilient suppliers Engaged employees 23
Slide 24: 2Q23 Financial Results - Consolidated
2Q23 Financial Results - Consolidated
Slide 25: CFO quote on demand normalizing
“ The temporary hiccup in 1H23 from the ongoing high inventory level at our customers and logistic normalization, however, we see signs of demand gradually normalizing from 3Q23 onward. ” Ludovic Garnier, Group CFO Slide 25 2Q23 Analyst Meeting
Slide 26: 2Q23 Key Takeaways
Showing better momentum from core operation improvement 2Q23 Key Takeaways Improve FY • Revised FY guidance from share from operations of THB -600mn to THB -500mn guidance for • Red Lobster achieved the committed financial position of a USD 65mn RL operations guarantee of a portion of Red Lobster’s
Slide 27: Tuna, shrimp and salmon prices
Tuna prices remained high at an average of USD 2,000/ton, while shrimp prices reach the lowest level in 11 years Higher salmon Tuna price remained high in price led by cost 2Q23 but is expected to 130 Salmon (NOK/kg) inflation in last year 2,300 Tuna (Skipjack) (USD/ton) decline in Aug 2023 onwards
Slide 28: Freight cost and macro overview
Freight cost and transit time are lower than the pre-covid level, while inflation continues declining Logistics: Freight price impact turned positive Macro economic overview Ocean transit time (days) Freight cost (USD) The impact of freight price Thailand to US Thailand to US • Headline inflation in
Slide 29: Global consumption in US and Europe
Different directions of Global consumption in each region US consumption Europe consumption US consumption is still growing according to EU consumption indicated by retail sales various economic data in Jun, which might dropped by 2.9% YoY, which align with the support our frozen business in 2H23 si
Slide 30: THB depreciation against key currencies
THB has been depreciating QoQ against all key currencies, supporting the export industry 50.0 38.0 USD/THB 49.0 GBP/THB 37.0 48.0 47.0 36.0 46.0 35.0 3Q22 45.0 34.0 36.4 44.0 3Q21 43.0 45.44Q21 1Q22 33.0 42.0 2Q21 2Q22 2Q23 45.0 44.4 2Q22 2Q23 32.0 4Q21 41.0 43.9 34.4 1Q23 34.5 43.2 3Q22 4Q22 43.1 3
Slide 31: FX impact on 2Q23 results
FX volatility generated significant FX losses in 2Q23 below OP but positive sales adjustments We recorded two lines from FX impact: In Net sales line (in mTHB) 2Q22 2Q23 THB 120mn sales adjustments in 2Q23, Sales 39,247 33,937 mostly resulting from 1Q23 period where forward rate Sales adjustments (3
Slide 32: Red Lobster performance improved YoY
Red Lobster’s performance massively improved YoY, thanks to our turnaround strategy; yet, guest count still to be improved THB mn 2Q23 1Q23 4Q22 3Q22 2Q22 FY share of profit/loss 2022 2021* 2020 2019 (THB mn) Share of profit/loss Operations -1,207 -178 -1,187 -142 -94 121 -344 -339 -281 from operati
Slide 33: Red Lobster strategic pillars and guidance
We improved RL full year guidance and continue to focus on crucial actions to achieve our business goals Grow Traffic Operational Excellence and Huge improvement on Wow the Guest Improve Prime Cost 1H23 performance, thanks Strategic Pillars to all changes performed, ▪ Make visits to RL an everyday •
Slide 34: Net working capital and returns
2Q23: Net working capital slightly decreased, thanks to Europe and US operations as expected ROE INV Days Net Debt to EBITDA 155 139 144 139 145 5.17x 5.26x 13.8% 14.8% 4.07x 4.40x 11.1%* Target 9.8% 9.4% 3.67** 3.67x 4.0-4.5 52,528 56,319 52,622 52,948 52,765 2Q22 3Q22 4Q22 1Q23 2Q23 2Q22 3Q22 4Q22
Slide 35: 1H23 net debt movement
1H23: Net debt increased to THB 53.2bn mainly from active financing activities (share buy back and i-Tail investments) ND/E 0.54x Income tax paid and other investing ND/E 0.64x Free Cash Flow THB 3.1bn Kd* = 3.40% & financing activities Kd* = 3.47% THB mn 53,162 683 321 47,328 2,979 1,416 -123 2,299
Slide 36: Interest-bearing debt profile
Higher portion of float-rate loans mainly from short-term loan increased supporting NWC Interest-bearing debts of THB 65bn By Currency By Maturity By Interest Rate Short-term loan* 16% JPY 8.5% 7.9% 22% EUR 0.7% Current portion 4% 0.5% of long-term 9% USD 14.9% 13.8% debt & finance Float, 31% lease
Slide 37: 2Q23 Business Performance
Lx 2Q23 Business Performance SS
Slide 38: Category mix
Category mix: Ambient sales contribution increased to the expense of Petcare category Total 1H23 sales: THB 66,709mn Categories Business 48% (43% LY) 35% (37% LY) 10% (13% LY) 7% (7% LY) Ambient Seafood Frozen and Chilled PetCare Value Added & Others THB 32,361mn THB 23,177mn THB 6,663mn THB 4,508mn
Slide 39: 1H23 sales by category
1H23 soft sale performance explained by high baseline and negative freight price impact of ~1.5% in 1H23 70,000 1H21 1H22 1H23 1H21 1H22 1H23 Sales (THB bn) 60,000 -0.4% 50,000 75.2 +12.2% 67.0 40,000 -14.0% 66.7 32.4 32.4 28.9 30,000 26.9* 27.7 23.2 -6.6% 20,000 +10.7% 9.9 10,000 7.1 6.7 4.1 5.2 4.
Slide 40: Ambient seafood: record quarterly sales
Ambient seafood: Record quarterly sales over the past 9 years with healthier GPM, despite ongoing economic headwinds Sales (THB mn) +12.2% Quantity (tons) -10.7% +1.3% YoY -12.0% YoY +12.5% QoQ +3.2% QoQ 16,912 16,985 17,086 17,136 15,272 15,225 88,959 90,347 84,948 87,827 76,988 79,465 Brand 57% 57
Slide 41: 1H23 Ambient seafood
1H23 Ambient seafood: Gradually recovered in Q2 onward Ambient Seafood Continued push to improve profitability Sales (THB mn) and Gross Profit Margin (%) 21.1% 21.4% 21.3% • Continue to increase the selling prices to cover rising 20.6% 19.1% 25% 90,000 20% key raw material costs and product mix impr
Slide 42: Frozen & chilled margin improvement
Frozen & chilled: Huge improvement in gross profit margin, close to 10% Quantity (tons) Sales (THB mn) -22.7% -18.7% -17.3% YoY -1.6% QoQ -9.9% YoY 14,869 +5.4% QoQ 13,900 14,820 14,453 78,791 73,704 11,684 11,493 71,086 65,352 35% 36% 39% 60,768 64,034 38% Brand 39% 33% Brand 75% 76% 76% 75% 77% 76
Slide 43: 1H23 Frozen & chilled
1H23 Frozen & chilled: topline decline from raw materials deflation (shrimp, lobster, crab) and rightsizing of our US Frozen business Frozen & chilled Seafood Focused on improving productivity and cost efficiency Sales (THB mn) and Gross Profit Margin (%) 11.8% 15% • Reinforce cost savings measures
Slide 44: PetCare gross margin recovering
PetCare: Gross profit margin recovering, thanks to net pricing/mix improvement Sales (THB mn) Quantity (tons) -13.7% -19.8% -41.8% YoY -38.0% YoY -9.3% QoQ -8.4% QoQ 6,210 38,405 37,485 5,442 5,568 34,776 0% 0% 26,886 1% 0% 3,674 1% 3,495 3,169 1% 23,562 21,574 Brand Brand 0% 0% 99% 100% 100% 0% 0%
Slide 45: 1H23 PetCare
1H23 PetCare: challenges remain from customers continued destocking inventories in the U.S. and E.U. PetCare Investing into capacity expansion & strategic partnership Sales (THB mn) and Gross Profit Margin (%) 45,000 25.6% 24.3% 26.3% 27.5% 30% • Established two new sales offices in 1H23, Europe and
Slide 46: Value-added & others margin
Value-added & others: gross profit margin dropped mainly due to value-added products and packaging Sales (THB mn) Quantity (tons) +9.3% -3.9% -16.0% YoY -5.1% YoY +0.5% QoQ -4.6% QoQ 2,691 2,741 2,505 52,185 53,312 2,248 2,260 47,717 48,320 48,032 2,067 14% 14% 12% 6% 6% 5% 3% 45,837 Brand 13% 18% B
Slide 47: 1H23 Value-added & others
1H23 Value-added & others: Maintain solid gross profit margin Value-added & others Sales (THB mn) and Gross Profit Margin (%) Growing Value-Added to uplifting margins 28.5% 29.4% 28.0% 26.0% 26.5% 35% 30% • Future of Culinary, current at installation and commissioning 25% stage and expected to comme
Slide 48: 2023 Outlook
2023 Outlook
Slide 49: Adjusted 2023 guidance
Adjusted 2023 guidance Sales -5 / -6% YoY decline (from +3 – 4% YoY) Gross profit margin ~ 16.5 – 17.5% (from 17.5 – 18.0%) SG&A to sales ~ 11.0 – 12.0% Effective interest rate Increase 0.5 – 1.0% CAPEX ~ THB 5.5 – 6.0bn (from THB 6.0 – 6.5bn) Dividend policy At least 50% dividend payout ratio Slide
Slide 50: 2023 sales guidance adjustment
2023 sales guidance adjustment mainly from PetCare and US Frozen businesses TU Group Sales Initial guidance delivered in 4Q22 +5 / +6% YoY i-Tail revised down -5 / -6% US frozen rightsizing & deflation -3 / -4% Freight price impact (excl. Petcare) -1% Changed FX assumption -1%* Revised guidance as o
Slide 51: Profit protection plan measures
In order to mitigate soft performance, we implemented profit protection plan measures with extraordinary actions across geographies and operations to improve profitability during 2H23 Rightsizing or Corporate functions Operations stoppage of loss- Commercials making operations • Target 10% cost savi
Slide 52: Thank You!
Placeholder for graphic (paste graphic, crops to H19.05*W10.5) (add TU logo) Thank You! 2Q23 Analyst Meeting Feedback Survey
Slide 53: Share capital information
Share capital information Stock Performance at a Glance Major Shareholders Bloomberg/ Reuters TU TB/ TU.BK As of June 30, 2023 Share price (August 4, 2023) THB 13.30 Others, 53.15% Historical closing price 52-week high THB 19.10 Chansiri 52-week low THB 12.40 Family, No. of paid-up shares 4,771.8mn
Slide 54: Investment in five listed companies
Thai Union’s investment in five listed companies with a total market value above Thai Union’s market capital Share price No. of Shares Market Capital % Holding by Value to TU (THB)* (M. Shares) (M. Baht) TU (M. Baht) THB 18.60 3,000 55,800 79.82% 44,540 INR 168.80 136 22,957 24.21% 5,558 THB 8.10 50
Slide 55: Four major CAPEX projects
Four major CAPEX projects will be completed in 2023 onward Culinary business Ingredients business PetCare business Ambient tuna business Key Ready-to-eat, Protein hydrolysate Wet pet food Ambient tuna cold Products dimsum and bakery and collagen peptide and treat storage Increased by 18.7% ~11,500 s
Slide 56: Sales contribution by geography and business
Sales contribution increased mainly from Europe and Thailand Sales Breakdown by Geographic • 1H23 lower sales contribution are mainly 100% from the U.S., Japan and EM & rest of the 15% 13% 14% 12% 12% 13% 12% Others 80% 6% 6% 6% 5% 5% 6% 6% Japan world 9% 11% 11% 10% 10% 11% 12% Domestic • The U.S.
Slide 57: 1H margin dropped YoY
1H margin dropped YoY mainly from slow sales across all categories Gross Profit 33,000 Operating Profit 10,000 THB mn 28,000 25,727 27,206 THB mn 9,000 7,834 8,220 7,872 23,418 8,000 20,110 1H22 7,000 1H21 1H21 23,000 5,642 4,390 1H22 12,312 12,939 6,000 3,283 18,000 (17.2%) 10,664 5,000 (6.6%) 13,0
Slide 58: Geographic diversity: 1H23 Sales
Geographic diversity: 1H23 Sales United States and Canada Europe 40% 30% Pacific Ocean Pacific Ocean Atlantic Ocean Others Thailand 18% Indian Ocean (Asia, Australia, Middle East, Africa and South America) 12% Slide 58 2Q23 Analyst Meeting
Slide 59: US & Canada sales
US & Canada: Soft sales from rightsizing frozen business, plus slow demand from destocking issue Sales THB mn -18.4% -23.2% YoY -9.8% QoQ 18,456 17,135 15,571 16,540 14,071 12,699 2Q21 2Q22 3Q22 4Q22 1Q23 2Q23 2Q23 North America sales decreased 23% YoY • Sales dropped mainly from frozen & chilled se
Slide 60: Europe sales
Europe: All-time high quarterly sales, led by Ambient and value-added Sales THB mn +2.9% +3.7% YoY +30.2% QoQ 10,800 10,723 10,628 10,711 11,118 8,542 2Q21 2Q22 3Q22 4Q22 1Q23 2Q23 2Q23 EU sales grew strongly at 4% YoY and 30% QoQ • EU recorded high quarterly sales mainly from higher selling prices
Slide 61: Thailand sales
Thailand: Demand recovery, thanks to Ambient seafood Sales THB mn +14.7% +5.3% YoY +10.1% QoQ 3,957 4,244 4,280 3,783 4,166 3,631 2Q21 2Q22 3Q22 4Q22 1Q23 2Q23 2Q23 Thailand sales increased strongly by 5% YoY and 10% QoQ • Domestic sales rose mainly from ambient, partially offset by packaging Slide
Slide 62: Emerging Markets and rest of world sales
Emerging Markets (EM) and rest of the world: Sales dropped mainly from high based last year Sales THB mn +3.3% -21.4% YoY -2.9% QoQ 7,725 7,428 7,486 5,881 6,256 6,075 2Q21 2Q22 3Q22 4Q22 1Q23 2Q23 2Q23 EM and rest of world sales decreased 21% YoY • Sales decreased across key countries from soft dem
Slide 63: 2Q23 Free cash flow
2Q23 Free cash flow generates substantial positive at THB 3.3bn Quarterly Free Cash Flow THB mn • 2Q23 reported materially positive Free 3,862 cash flow at THB 3.3bn, mainly from net 3,319 working capital decrease in Europe and 1,632 US operation 859 803 • 2Q23 Net Capex spending was THB 1.4bn for t
Slide 64: 2Q23 Category profitability
2Q23 Category profitability Business category Sales Margin Gross profit THB mn % THB mn Ambient seafood 17,136 19.9 3,418 • Tuna • Sardine and mackerel (2Q22: 16,912) (2Q22 : 19.5%) (2Q22 : 3,294) • Ambient and pouched salmon Frozen and chilled seafood • Shrimp and related1 11,493 9.6 1,108 • Lobste
Slide 65: Union
Union