Thai Union Group (TU), one of the world’s largest seafood processors, says it is seeing signs of a sales recovery after a first-quarter dip.
The company on Friday reported sales of 32.7 billion baht in the first quarter, a 10% decrease from a high baseline in the same period last year.
First-quarter net profit was 1 billion baht, down 41.5% from 1.7 billion a year ago, mainly attributed to two non-comparable items.
In the first quarter of 2022, the company booked deferred interest of 239 million baht (after tax) from its Red Lobster restaurant business, compared with no deferred interest in the first quarter of 2023 because of interest rate hikes, and a 200-million-baht net profit dilution effect from TU’s reduced stake in i-Tail, from 99.5% to 77.8% following the pet food company’s listing on the Stock Exchange of Thailand in December 2022.
Excluding the two non-comparable items, quarterly net profit declined by 21.8%, the company said in a statement to the SET on Friday.
The company also reported an operating profit of 121 million baht in the first quarter for the Red Lobster chain, improving from a loss of 243 million baht a year ago, thanks to its turnaround plan for the business.
The company said the overall sales decline was anticipated as demand for the group’s products softened across all markets, with customers managing high inventory levels by reducing orders, while high prices of raw materials also prompted a slowdown in purchases.
“We expect the first quarter to be the softest period of this year as a result of a high sales baseline in the first quarter of 2022, together with a high inventory level for our customers and logistics normalisation,” said chief executive Thiraphong Chansiri.
“However, we remain optimistic about 2023 growth as we have already seen signs of improvement in the second quarter and expect normalisation in the latter half of the year as the consumption trend of seafood and healthier proteins continues to rise globally.”
The first-quarter results showed an improvement in selling and administrative expenses, which fell by 12.1% to 4.12 billion baht, following an improvement in freight costs and logistics normalisation.
High levels of inventory across global markets and high fish prices resulted in softer demand, pushing down sales for Thai Union’s ambient business by 1.9% year-on-year to 15.2 billion baht.
Pet care business sales declined by 21.9% to 3.5 billion baht.
Meanwhile, the frozen and chilled seafood business reported a 15.3% decrease in sales to 11.7 billion baht, attributed to a high baseline last year and seafood market price normalisation.
For the value-added and others business unit, sales were down 9.5% to 2.2 billion baht, although the gross profit margin stayed at 27.3%.
Sales in North America accounted for 43% of total revenue in the first quarter, followed by 26% from Europe, 19% by others and 12% from Thailand.
“We continue to focus on profitability, operational excellence and financial discipline while navigating our business through the year,” said Mr Thiraphong.
“Thai Union’s balance sheet remains strong, with net debt-to-equity at 0.57 times, which is below our target of 1.0-1.1 times. Going forward, this will allow us to prioritise mergers and acquisitions, focusing on businesses that are a strategic fit for the group.”
Thai Union has ongoing investment projects to expand its capacity across various categories with a budget of 6-6.5 billion baht. The projects include three new factories in Samut Sakhon and one cold storage plant in Ghana: a ready-to-eat dim sum and bakery factory; a factory to produce protein hydrolysate and collagen peptide; a wet pet food and treat factory with an automated packing line; and a cold storage plant for the ambient tuna business.