Thai Union Group Public Company Limited · SET:TU

Thai Union Group Public — Q2 2017 Earnings Presentation

59 slides from Thai Union Group Public's earnings presentation, Aug 8, 2017

  1. Slide 1: 2Q17 Results Presentation

    2Q17 Results Presentation 8 August 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 2Q17 Financial Results Business Outlook Page 3

  4. Slide 4: Agenda

    Agenda Key Highlights Recent Developments 2Q17 Financial Results Business Outlook Page 4

  5. Slide 5: CEO quote: 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: 2Q17: Strong cost control and Red Lobster support operation

    2Q17: Strong cost control and Red Lobster support operation  Stable quarterly sales. 2Q17 sales growth YoY Chg % of sales marginally improved from the previous year mainly driven by a product repricing from increased raw material prices 34,818 Sales +1.2% (THB mn)  Rising raw material prices. Gros

  7. Slide 7: 1H17 Net profit up 4.4% YoY, improved balance sheet

    1H17 Net profit up 4.4% YoY, improved balance sheet Financial Summary1 1H17 Net Profit (THB million) up 4.4% YoY to Total Sales 1H17 1H16* 66,244 65,611 +1.0% THB 2,880million 1H17 8,998 Gross Profit -14.0% Q1’12 1H16* 10,459 Share price movement Q1’11 20162 20172 Operating 1H17 2,508 (Jan- Dec 16 )

  8. Slide 8: 2Q17: Continued overall operational resilience

    2Q17: Continued overall operational resilience Total sales (THB mn) GPM NPM Raw material prices rising 60,000 20.0% 17.3% 16.9% 18.0% 50,000 16.0% 15.9% 13.8% 14.2% 14.1% 13.8% 16.0% 13.5% 13.4% 14.0% 40,000 34,401 35,128 33,637 34,818 32,602 33,333 31,210 31,427 12.0% 30,642 30,000 28,606 10.0% 8.0

  9. Slide 9: Agenda

    Agenda Key Highlights Recent Developments 2Q17 Financial Results Business Outlook Page 9

  10. Slide 10: Recent developments

    Recent developments Recognitions: 28 July 17: TU remains a constituent of the 25 July 17: TRIS affirmed TU and the rating 6 July 17: John West awarded “Best UK’s FTSE4Good Index following the June 2017 of TU’s senior unsecured debenture’s credit canned seafood brand of the year” by the index review.

  11. Slide 11: Recent developments

    Recent developments Sustainability: 5 June 2017: TU released the 4th version of SD report for 2016 containing the detail of TU global operation and sustainability 6 June 17: TU commits to World Economic strategies and initiative Forum’s Tuna 2020 Traceability from January to December 27 June 17: Tha

  12. Slide 12: Commercialized first innovation product

    Commercialized first innovation product July: Officially commercialized first innovation product “Yellowfin Tuna Slice” through our own brand “Chicken of the Sea” via Foodservice channel across the US Yellowfin tuna burrito fresco Black Pepper Yellowfin Tuna Slices Big easy yellowfin tuna sandwiches

  13. Slide 13: Agreement between Thai Union and Greenpeace

    Agreement between Thai Union and Greenpeace 11 July 2017: Thai Union entered into a joint agreement in July with Greenpeace to commit to more sustainable, socially-responsible seafood, building upon the company’s sustainability strategy, SeaChange® “Thai Union has fully embraced its role as a leader

  14. Slide 14: Active PR campaigns of Red Lobster

    Active PR campaigns of Red Lobster Crabfest Lobster & shrimp Summerfest “Now this is seafood” “Take your favorite seafood – lobster and shrimp and turns it into summer on a plate” Summerfest was held during 29 May – 9 Jul Crabfest was held during 10 Jul – 3 Sep American customer satisfaction index s

  15. Slide 15: Fully divested fishing fleets in August 2017

    Fully divested fishing fleets in August 2017 2007 2010 2015 1Q17 2Q – 3Q17 $ $$$$$ Entered to tuna Operated 6 tuna Owned fishing Fully divested the fishing fleet fishing flees with One fishing boat fleets through remaining 5 fishing business in catches of 20,000 was effectively sold an acquisition f

  16. Slide 16: Rising to the FUTURE

    Rising to the FUTURE

  17. Slide 17: Ensuring stable cash return for shareholders

    Ensuring stable cash return for shareholders Proposed final 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 0.4

  18. Slide 18: Agenda

    Agenda Key Highlights Recent Developments 2Q17 Financial Results  TU’s Consolidated Results  Results by Business Unit Business Outlook Page 18

  19. Slide 19: CFO quote: committed to deliver solid growth

    “Despite challenging operating environment, we remain committed to deliver solid growth and enhance our shareholders’ value.” Joerg Ayrle Group Chief Financial Officer Page 19

  20. Slide 20: Headwinds remained

    Headwinds remained • Difficulty to pass on price increases to consumer High tuna prices • Competitive pressure in the private label business (+17.3% YoY, +8.0% QoQ) • Tuna volumes are under pressure High shrimp prices • An increase in shrimp price put pressure on gross profit margin (+3.1% YoY, -20.

  21. Slide 21: Surging tuna prices put pressure on operation

    Surging tuna prices put pressure on operation 2,500 Skipjack Tuna Raw Material Price (USD/ton) 2Q17 1,763 1,950 2,000 1Q17 2Q16 4Q16 1,633 1,900 1,503 3Q16 1,508 1,690 1Q16 1,700 1,610 1,433 1,700 1,257 1,500 1,500 1,700 1,500 1,600 1,400 1,450 1,400 1,625 1,500 1,400 1,450 1,170 1,000 1,000 500 Jan

  22. Slide 22: The key take away for 2Q17 results

    The key take away for 2Q17 results • Sales +1.2% YoY, due to soft demand and weak European currency Resilient sales growth • At constant exchange rates, 2Q17sales would have increased by 4.5% • High tuna prices put pressure on gross profit margin A weaker GPM from high raw • European salmon business

  23. Slide 23: 2Q17 A stable sales trend hinder by currency fluctuation

    2Q17 A stable sales trend hinder by currency fluctuation Sales +1.2% YoY THB mn +10.8% QoQ  2Q17 sales grew by 1.2% YoY to THB 34,818mn (up 4.0% YoY in dollar term to USD1,015mn), 34,401 35,128 33,637 34,818 driven by: 31,427  Ambient seafood business, while seeing product repricing, was facing di

  24. Slide 24: 2Q17 resilient sales growth, hindered by the FX impact

    2Q17 resilient sales growth, hindered by the FX impact Revenue growth component (THB million) +1.2% YoY +1.0% YoY +1,060 -611 -984 +806 -375 +440 +1,080 -361 +269 -3% 66,244 -138 -523 65,611 -121 +14% -13% +10% -5% -2% +4% -40 +120 -3% 34,818 +8% +170 -115 +60 -0% +314 34,401 -3% +5% +20% +2% -4% +2

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

    Growing branded sales mix amid foreign currency volatility Sales Breakdown by Geographic  1H17 Sales contribution in key markets remained 100% stable compared to 2016 sales mix by geography. 14% 13% 14% 13% 15% However, the key changes were seen in the other 80% 8% 7% 6% 6% 6% 7% 7% 8% 8% 8% Others

  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 -14.5% YoY 26.0% THB mn +7.8% QoQ 24.0%  2Q17 Gross profit of THB 4,669mn, up 7.8% QoQ, 22.0% driven by the seasonal sales improvement of 5,463 10.8% QoQ. On YoY basis, the gross profit was 4,937 4,669 20.0% 4,530 4,

  27. Slide 27: Operating profit: Strong cost control

    Operating profit: Strong cost control 15.0% Operating Profit 13.0% -22.4% YoY THB mn +84.6% QoQ 11.0%  2Q17 Operating profit of THB 1,627mn, up 84.6% QoQ, driven by stringent cost control. However, 2,097 9.0% the operating profit down 22.4% YoY, driven 1,872 mostly by a weak gross profit margin dur

  28. Slide 28: SG&A saving aided challenging operation

    SG&A saving aided challenging operation Implemented strict cost saving initiatives Personnel cost control Administrative cost control 19.0% SG&A expense Marketing expense control THB mn 17.0% 3,394 3,448 3,282 3,366 3,295 3,005 3,066 15.0% 2,992 2,898 3,042 Rental cost renegotiation 13.0% %SG&A/ 10.

  29. Slide 29: Stable EBITDA supported by investments

    Stable EBITDA supported by investments 28.0% EBITDA -11.8% YoY THB mn -0.9% QoQ 23.0%  With a weak operating profit, TU reported 2Q17 EBITDA of THB 2,874mn, down 11.8% YoY and 3,259 18.0% 0.9% QoQ, driven mostly by fluctuating raw 2,917 2,899 2,874 material prices. The declining EBITDA YoY was 13.0

  30. Slide 30: Resilient net profit despite challenging environment

    Resilient net profit despite challenging environment 14.0% Net Profit -7.6% YoY THB mn 12.0% -3.9% QoQ  2Q17 net profit of THB 1,411mn, down 7.6% YoY 10.0% and 3.9% QoQ 8.0%  The declined net profit was driven by: 1,527 1,594 1,469  Raw material price fluctuation with tuna raw 1,411 6.0% material

  31. Slide 31: Normalized net profit of THB 1,372mn

    Normalized net profit of THB 1,372mn 20.0% Normalized 18.0% Net Profit -5.1% YoY THB mn 16.0%  Excluding the one-off quarter-end items, 2Q17 +30.4% QoQ 14.0% normalized net profit was at THB 1,372mn, 12.0% representing 5.1% decline YoY 10.0%  One-off positive items during 2Q17 of THB 39mn 1,446 co

  32. Slide 32: EPS: Keeps momentum despite operational headwinds

    EPS: Keeps momentum despite operational headwinds EPS* -7.6% YoY THB -3.9% QoQ  1H17 EPS was at THB 0.60, up 4.4% YoY, despite challenging operational headwinds 0.32 0.33 0.31 0.29 0.19 2Q16 3Q16 4Q16 1Q17 2Q17 1.07 1.11 0.98 +4.4% YoY 0.60 0.58 0.60 2012 2013 2014 1H16 1H17 Remark: *EPS in this sl

  33. Slide 33: Red Lobster investment is EPS accretive

    Red Lobster investment is EPS accretive Lent Period Seasonality Christmas & NYE THB mn 2Q17 1Q17 4Q16 Share of profit -49 203 -118 Other Income 259 261 240 Q1 Q2 Q3 Q4 Finance Costs -136 -127 -102 Average Fluctuation Income Tax 160 -113 39  RL’s contribution during 2Q17 amounted to THB 235mn, mainl

  34. Slide 34: 2Q17 strong free cash flow amid rising raw material prices

    2Q17 strong free cash flow amid rising raw material prices Quarterly Free Cash Flow THB mn  Despite high raw material prices, 2Q17 Free cash flow (FCF) was solid at THB 1,586mn, due mainly 1,586 to positive contribution from recent investments and improved working capital management 786 -29 -192 -4

  35. Slide 35: Debt refinancing secured long-term funding

    Debt refinancing secured long-term funding Interest-bearing debts of THB 65,477mn By Currency By Maturity EUR 1.0% 1.2% USD 21% 2018 1.3% 0.9% Short-term Loan 56% 1% Current 2019 Portion of Long- THB 97.7% 97.9% term Debt 2020 5% 2% & finance lease 2021 39% 78% onwards Long-term 42% Debt 2016 2Q17 2

  36. Slide 36: 2Q17: Strong operating cashflow enabled dividend payment

    2Q17: Strong operating cashflow enabled dividend payment Unit: THB mn Operating Activities Investing & Financing Activities ND/E 1.37x THB 4,257mn ND/E 1.33x Kd = 2.74% Kd = 3.23% Free Cash Flow THB 2,371 mn 64,942 64,867 -5,773 +219 +1,479 +489 +1,885 +108 +420 +429 +508 +159 Net Debt EBITDA Change

  37. Slide 37: Improving working capital efficiency

    Improving working capital efficiency ROE1 INV Days Debt to EBITDA 7.87 13.8% 14.8% 13.5% 12.8% 131 5.70 119 119 5.59 8.4% 106 108 3.80 2.95 2Q16 3Q16 4Q16 1Q17 2Q17 2Q16 3Q16 4Q16 1Q17 2Q17 2Q16* 3Q16 4Q16 1Q17 2Q17 ROCE2 Net WC3 ND/E4 1.37x 1.34x 1.33x 121 13.4% 10.7% 0.92x 9.3% 114 0.74x 8.1% 111

  38. Slide 38: Agenda

    Agenda Key Highlights Recent Developments 2Q17 Financial Results  TU’s Consolidated Results  Results by Business Unit Business Outlook Page 38

  39. Slide 39: 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 July, tuna price closed at USD 1,950/ton. In 2Q17, average price was at USD 1,763/ton (+17.3% YoY, +8.0% QoQ). 2,000 1,950 1,500 (Jul’17) 1,0

  40. Slide 40: Key operating impact: Exchange rate

    Key operating impact: Exchange rate USD/THB 38  In July, USD/THB closed at 33.75. In 2Q17, average USD/THB was 36 at 34.30 (-2.8% YoY, -2.3% QoQ). 34 33.75 (Jul’17) 32 30 28 Jan-14 Jan-15 Jan-16 Jan-17 EUR/THB 50  In July, EUR/THB closed at 38.83. In 2Q17, average EUR/THB was at 37.72 (-5.3% YoY,

  41. Slide 41: Thai Union's global footprint

    Thai Union’s global footprint Page 41

  42. Slide 42: 3 strategic business segments

    3 strategic business segments Total 1H17 sales: THB 66,244mn Frozen, chilled seafood PetCare, value added and Ambient seafood Sales: THB 30,440 mn and related others Sales: THB 26,858 mn Sales: THB 8,946 mn Shrimp & related Tuna business PetCare business1 Ambient & Pouch Frozen, chilled & Value-adde

  43. Slide 43: Ambient Seafood

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

  44. Slide 44: Ambient Seafood: High tuna price constrained growth

    Ambient Seafood High tuna price constrained growth Sales (THB million) Quantity (Tons) -2.8% YoY -5.7% YoY +16.4% QoQ +9.3% QoQ 120,000.00 20,000.00 16,846 16,371 119,000.00 118,000.00 117,000.00 116,000.00 101,582 90,028 88,415 87,643 95,773 19,000.00 115,000.00 114,000.00 113,000.00 112,000.00 111

  45. Slide 45: Frozen, chilled seafood and related

    Frozen, chilled seafood and related Page 45

  46. Slide 46: Frozen, chilled seafood and related: Solid growth

    Frozen, chilled seafood and related Solid growth Sales (THB million) Quantity (Tons) +6.0% YoY +8.0% YoY +8.0% QoQ +15.3% 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 81,000.00 18,000.00 17,000.00 15,138 15,317 80,000.00 79,000.00

  47. Slide 47: PetCare, value-added and others

    PetCare, value-added and others Page 47

  48. Slide 48: PetCare delivering solid operational performance

    PetCare, value-added and others PetCare delivering solid operational performance Sales (THB Million) Quantity (Tons) +2.2% YoY +1.2% YoY +1.3% QoQ +2.7% QoQ 6,000.00 5,177 50,000.00 49,000.00 48,000.00 47,000.00 42,493 5,000.00 4,404 4,549 4,444 4,502 46,000.00 45,000.00 44,000.00 43,000.00 42,000.0

  49. Slide 49: 1H17 Segment Profitability

    1H17 Segment Profitability Sales Margin Gross Profit New segment (THB million) (%) (THB million) Ambient seafood 30,440 15.5% 4,726 *Tuna business *Sardine & Mackerel *Ambient & Pouch Salmon Gross Profit Frozen, chilled seafood and 26,858 9.0% 2,406 THB 8,998 million related *Shrimp & related busine

  50. Slide 50: Agenda

    Agenda Key Highlights Recent Developments 2Q17 Financial Results Business Outlook Page 50

  51. Slide 51: Favorably positioned to achieve USD 8bn sales target

    Favorably positioned to achieve USD 8bn sales target Focusing on executing organic growth initiatives Annual Sales USD Bn 8.0 2.5 6.3 3.8 FY2016 Red Lobster Pro forma Organic Emerging Marine Food 2020F Sales Market Ingredient Service Target Page 51

  52. Slide 52: Fully shift gear to profitability-focused organization

    Fully shift gear to profitability-focused organization Category Highlight Continue to profitably grow market share in European ambient markets 1 Operation improvement Improved profitability of the tuna business (COSI and Private Label business) European salmon business improvement M&A / Post Merger

  53. Slide 53: Appendix

    ia Thai Page Se ® Union

  54. Slide 54: Share Capital Information

    Share Capital Information Stock Information Major Shareholders Bloomberg/ Reuters TU TB/ TU.BK As of 30 Jun 2017 Share price (4 Aug 2017) : THB 19.90 Historical price : Chansiri Family 52-week high THB 22.70 20.8% 52-week low THB 19.50 No. of paid up shares : 4,771.82mn Niruttinanon Par value : THB

  55. Slide 55: 2Q17 Income Statement

    2Q17 Income Statement Consolidated 2Q17/ 2Q17/ % % % (Unit: THB mn) 2Q17 2Q16** 1Q17 2Q16 1Q17 to sales to sales to sales Change Change Sales 34,818 100% 34,401 100% 31,427 100% 1.2% 10.8% Cost of sales (30,149) -86.6% (28,938) -84.1% (27,097) -86.2% 4.2% 11.3% Gross profit 4,669 13.4% 5,463 15.9% 4

  56. Slide 56: 1H17 Income Statement

    1H17 Income Statement 1H17/ % % (Unit: THB mn) 1H17 1H16** 1H16 to sales to sales Change Sales 66,244 100% 65,611 100% 1.0% Cost of sales (57,246) -86.4% (55,151) -84.1% 3.8% Gross profit 8,998 13.6% 10,459 15.9% -14.0% SG&A expenses (6,491) -9.8% (6,760) -10.3% -4.0% FX gain (loss) 630 1.0% 296 0.5

  57. Slide 57: Statement of Financial Position as of 30 June 2017

    Statement of Financial Position as of 30 June 2017 % to total % to total (Unit: THB mn) 1H17 2016 Change assets assets Cash and cash equivalents* 610 0.4% 976 0.7% -37.5% Trade and other receivables - net 18,077 12.5% 16,412 11.5% 10.1% Inventories - net 40,418 27.9% 39,626 27.8% 2.0% Other current

  58. Slide 58: 1H17 Statement of Cash Flow

    1H17 Statement of Cash Flow Consolidated (Unit: THB mn) 1H17 1H16 Change Profit before income tax 3,312 3,924 (612) Adjustments for depreciation & amortisation expenses 1,356 1,421 (65) Other adjustments 702 656 046 Changes in operating assets and liabilities (665) 923 (1,588) Cash flows receipts fr

  59. Slide 59: Thank you

    Thank you Corporate website: http://www.thaiuniongroup.com IR website: http://www.thaiuniongroup.com/en/investor.ashx E-mail: [email protected] Tel:59+66 2298 0024 Page

Thai Union Group Public Company — Q2 2017 Earnings Presentation on 6ix