Thai Union Group Public Company Limited · SET:TU
Thai Union Group Public — Thai Union Group PCL — Q2 2018 Earnings Presentation
61 slides from Thai Union Group Public's earnings presentation, Aug 7, 2018
Slide 1: 2Q18 Results Presentation
2Q18 Results Presentation Thai Union Group PCL. 7 August, 2018 The Okura Prestige Bangkok
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: Agenda: Key Highlights
Key Highlights Recent Developments 2Q18 Financial Results Business Outlook
Slide 4: CEO quote on continued innovation and diversity
“We will continue to work harder to weather the industry’s volatility as we focus on continued business and product innovation, while growing our geographic diversity.” Thiraphong Chansiri President and Chief Executive Officer
Slide 5: 2Q18 Key Highlights
(THB mn) Sales Gross Profit Operating Net Profit Profit 34,137 4,709 1,142* 1,368* Excluding FX, sales stable Stable raw material prices Strict cost control Improved net profit QoQ YoY Gross profit improved Normalized operating profit Normalized net profit up 2Q18 sales declined YoY 40.1% QoQ, drive
Slide 6: 1H18 Net Profit Financial Summary
1H18 Net Profit Financial Summary1 1H17 1H18 -3.6% down 21.6% YoY to (THB million) -15.1% 66,244 THB 2,237 million 63,839 -14.3% 9,505 8,068 Share price movement 5,746 20172 20182 -21.6% (Jan- Dec 17 ) (Jan- Jun 29,18 ) -53.0% 4,922 -5.7% -23.7% 2,853 2,481 2,237 Declining debt, while equity 1,167 r
Slide 7: Total sales, GPM and NPM trend
Total sales (THB mn) GPM NPM 18.0% 60,000 15.9% 14.1% 14.5% 14.2% 16.0% 13.4% 13.2% 13.8% 50,000 14.0% 12.1% 11.3% 12.0% 40,000 34,401 35,050 35,185 34,137 33,715 34,818 35,105 31,427 29,703 10.0% 30,000 8.0% 4.4% 4.5% 4.6% 4.9% 6.0% 20,000 4.1% 4.1% 4.0% 2.7% 2.9% 4.0% 10,000 2.0% 0 0.0% 2Q16 3Q16
Slide 8: Agenda: Recent Developments
Key Highlights Recent Developments 2Q18 Financial Results Business Outlook
Slide 9: Recognition in investment community; FTSE4Good; Sustainability Report
July 2018 — Strong recognition in Thailand’s investment community August 2018 — Remains a constituent of FTSE4Good Index Series Thai Union was recognized as Thai Union remains a constituent of the Best Public Company (SET) of FTSE4Good Index for three consecutive years the Year 2018 in Agro and Food
Slide 10: Packaging innovation and Infusions product launches
July 2018 — Launch of packaging innovation product at July 2018 — Chicken of the Sea Infusions product retail stores in UK launched in USA Thai Union’s John West has launched an innovative Thai Union has continued its expansion of product portfolio by clear plastic packaging for ambient tuna product
Slide 11: Petit Navire chilled tuna and Yellowfin Tuna Slices
July 2018 — Launch of fresh, pasteurized tuna chilled July 2018 — Commercialization of Yellowfin Tuna Slices through the product under Petit Navire brand Food Service business Thai Union’s Petit Navire has launched an innovative, • Thai Union’s Yellowfin Tuna Slices™ are the world’s first pre-sliced
Slide 12: Acquisitions: Thammachart Seafood and TUMD Luxembourg
July 2018 — The acquisition in Thammachart Seafood July 2018 — Strategic investment to TUMD Luxembourg Retail Co., Ltd (TSR) S.a.r.l (TUMD) Thai Union has completed the acquisition of 25.1% Thai Union has continued its focus on expansion by shares to TSR in Thailand, as part of efforts to expand the
Slide 13: Interim dividend THB 0.25 per share
Interim dividend for the period: 1 Jan 18 to 30 June 18 DPS THB 0.25 Book closing date 21 August 2018 Payment date 3 September 2018 THB/Share 0.70 59.9% 0.60 56.7% 57.2% 53% 51.3% 52.3% 53.3%* 50% 50% 51% 50.7% 50.0% 50.5% 0.50 0.40 29.4% 0.25 0.31 0.31 0.34 0.30 0.20 0.22 0.10 0.30 0.28 0.28 0.32 0
Slide 14: Agenda: 2Q18 Financial Results
Key Highlights Recent Developments 2Q18 Financial Results • Consolidated Results • Results by Business Unit Business Outlook
Slide 15: Joerg Ayrle, Group Chief Financial Officer
Joerg Ayrle Group Chief Financial Officer Slide15
Slide 16: Chicken of the Sea legal settlement update
Chicken of the Sea has reached settlement with Walmart Further discussions and relations with other plaintiffs underway Estimated total risk of USD 44mn (including other litigation costs) The overall process will take another 2 years to fully resolve Ongoing legal fees of approx. USD 2.0mn per quart
Slide 17: Challenged top line, GPM recovery, continued cost control
• Exclude FX impact, 2Q18 sales is stable (-0.1%) YoY, while volume sales was Challenged top line also stable from same period last year • Reported sales at THB 34.1bn down 2.0% YoY from THB appreciation • Margin recovery to 13.8%, up from 11.3% in 1Q18, but slightly below 2Q17. • Tuna segment saw m
Slide 18: Export cost increase due to THB appreciation
Export cost increase due to THB appreciation THB bn 603 500 ❖USD depreciated by 7% vs. THB in 2Q18 0.4 503 (10% in 1Q18) 420 ❖Volatility pressures Thai operations 403 productivity 303 ❖With costs of approx. THB 7.2bn per quarter and 78% Thai operations for 203 Export business, we estimate inflation
Slide 19: Tuna price trend
(USD/ton) 2,800 4Q17 2,033 3Q17 2,010 2,300 2,300 -22.5% 2Q17 1,763 2,100 2Q18 1,980 2,000 1Q18 1,667 1Q17 1,950 1,900 1,577 1,633 1,800 1,800 1,800 1,700 1,700 1,690 1,700 1,700 1,600 1,600 1,550 1,500 1,480 1,300 1,300 800 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-1
Slide 20: Sales
Sales THB mn -2.0% YoY +14.9% QoQ ❖Exclude FX, 2Q18 sales was stable YoY. 34,818 35,185 35,105 34,137 40,000 • Ambient business sales stable YoY 35,000 from price recovery, 29,703 30,000 • US business sales contracted 10% in 25,000 THB term, but up 3% in USD terms. 20,000 • Frozen and chilled sales
Slide 21: Revenue growth component
Revenue growth component THB mn -2.0% YoY 34,818 +195 -353 +7 +29 +593 +5 -44 -762 +31 -98 -380 +2% 0% +3% 0% -2% -13% +5% -9% 34,137 +95 -16% +25% -7% +1% -0.1% YoY Before currency impacts Tuna Sardine Salmon- 2Q17 Other Shrimp Lobster Salmon- Other Pet Care Value USD EUR 2Q18 & Ambient seafood - &
Slide 22: Sales breakdown by geography and business
Sales Breakdown by Geographic 100% 13% 14% 13% 15% 15% Others* 80% 7% 6% 6% 6% 6% ❖1H18 Sales contribution in key markets 7% 8% 8% 10% 10% Japan marginally shifted in favor of domestic Thai Domestic 60% 29% 29% 33% market, due partly to the company was focusing 32% 32% Europe more on selling product
Slide 23: Gross Profit
Gross Profit 30.0% THB mn 28.0% -5.0% YoY 26.0% 24.0% ❖ 2Q18 Gross profit was up 40.1% QoQ, +40.1% QoQ 22.0% • A seasonally strong sales up 14.9% 4,954 4,658 4,709 4,263 20.0% QoQ, 3,360 18.0% • Stable tuna price and selling price 16.0% recovery support margin expansion, 13.8% 14.2% 14.0% • Shrimp b
Slide 24: Operating Profit
20.0% Operating Profit 18.0% THB mn 16.0% 14.0% -30.2% YoY 12.0% ❖ 2Q18 Operating profit was up 45 +4,502% QoQ 1,636 10.0% times QoQ: 1,319 8.0% • Strong margin recovery QoQ 1,142 922 6.0% • Strict cost control initiatives 4.7% 3.3% 4.0% ❖ SG&A-to-sales ratio was at 10.4% OP Margin 3.7% 2.6% 25 2.0%
Slide 25: EBITDA
28.0% EBITDA THB mn 23.0% -4.2% YoY ❖ 2Q18 Normalized EBITDA up 28.0% +28.0% QoQ 18.0% QoQ, 2,883 2,990 2,640 2,763 • Business profitability improved 2,159 13.0% • A prudent cost control • YoY, EBITDA remain challenge from EBITDA Margin 8.0% competitive environment, down 8.3% 8.5% 8.1% 7.5% 7.3% 4.2
Slide 26: Net Profit
14.0% Net Profit THB mn 12.0% -3.7% YoY 10.0% ❖ TU’s 2Q18 net profit up 57.5% QoQ: +57.5% QoQ 8.0% ▪ Improved operation from price 1,737 1,421 1,440 1,369 6.0% recovery and stable raw material 4.0% prices, NPM 4.1% 4.9% 4.1% 869 4.0% ▪ FX gains of THB 222mn is a mix of 2.9% 2.0% FX losses from opera
Slide 27: Adjusted Net Profit
20.0% 18.0% Adjusted Net Profit THB mn 16.0% -25.8% YoY 14.0% ❖ Excluding one-off quarter-end items, 12.0% 2Q18 adjusted net profit was at THB +47.5% QoQ 10.0% 1,018mn, representing an improvement 1,590 1,372 1,374 8.0% of 47.5% QoQ, but was down 25.8% YoY: Adjusted NP Margin 1,018 6.0% • One-off ne
Slide 28: Earnings per Share (EPS)
Earning per Share (EPS)* THB -3.7% YoY ❖ 2Q18 normalized EPS was at THB 0.37 +57.5% QoQ 0.29, up 57.5% QoQ but down 0.30 0.30 0.29 3.7% YoY. 0.18 2Q17 3Q17 4Q17 1Q18 2Q18 1.26 1.10 1.11 1.10 -21.6% YoY 0.60 0.47 6M17 6M18 2014 2015 2016 2017 2018 Remark: *EPS in this slide represents fully diluted E
Slide 29: Red Lobster contribution to net profit
Red Lobster has contributed THB 96mn to net profit THB mn 2Q18 1Q18 4Q17 3Q17 2Q17 ❖ 2Q18 net positive contributor of THB Share of profit -128 137 -317 -33 -49 96mn, or 7.5% net profit accretive ❖ My Red Lobster Rewards loyalty Other program grew faster than projected income 259 235 248 247 259 ❖ Of
Slide 30: Quarterly and annual free cash flow
Quarterly Free Cash Flow THB mn 3,794 ❖ 2Q18 free cash flow of THB 3.8bn: • Improved profitability, 1,751 1,369 • A more stabilized raw material prices, and 280 -142 • An efficient inventory control 2Q17 3Q17 4Q17 1Q18 2Q18 ❖ 1H18 free cash flow of THB 5.2bn Cash Conversion 0.79 0.12 -0.08 0.94 1.23
Slide 31: Net debt movement
Unit: THB mn ND/E 1.38x Free Cash Flow** THB 5,163 mn Income tax paid and other investing & financing activities ND/E 1.41x Kd = 3.21% Kd = 3.04% Normalized ND/E 1.37x*** 66,419 64,951 +2,408 +142 +958 +2,553 +187 -4,922 +826 -3,220 -400 EBITDA Change in net Change in Other non- CAPEX Tax Net intere
Slide 32: Interest-bearing debts by currency and maturity
Interest-bearing debts of THB 65,923mn By Currency By Maturity EUR 1.0% 1.7% USD 21% Short-term loan 23% 0.9% Current portion 6% of long-term debt 2% & finance lease 2019 2020 THB 98.1% 96.3% 2021 2022 onwards Long-term debt 76% 73% 2017 2Q18 2017 1Q18 Long-term loan by maturity THB 67.2bn THB 65,92
Slide 33: ROE, inventory days, ND/E and working capital
ROE1 INV Days 143 Debt to EBITDA 15.6% 7.61 12.9% 12.9% 12.5% 6.40 5.99 125 123 5.69 5.64 122 7.8% 119 40,418 42,155 43,184 40,691 39,708 2Q17 3Q17 4Q17 1Q18 2Q18 2Q17 3Q17 4Q17 1Q18 2Q18 2Q17 3Q17 4Q17 1Q18 2Q18 INV (THB mn) INV Day ROCE2 Net WC3 129 ND/E4 8.4% 8.6% 1.41x 8.1% 1.38x 7.0% 1.37x 6.1%
Slide 34: Agenda: Results by Business Unit
Key Highlights Recent Developments 2Q18 Financial Results • Consolidated Results • Results by Business Unit Business Outlook
Slide 35: Tuna, shrimp and salmon prices
❖ Tuna price closed at USD 1,600/ton in June 2018. • 2Q18 average price was USD 1,667/ton (-5.4% YoY, +5.7% QoQ) ❖ Shrimp price closed at THB 144/kg in June 2018. • 2Q18 average price was THB 141/kg (-16.6% YoY, -23.0% QoQ) ❖ Salmon price closed at NOK 64/kg in June 2018. • 2Q18, average price was N
Slide 36: Currency movements: USD, EUR, GBP vs THB
USD/THB EUR/THB Continued depreciation from 2017 sees slight recovery in 2Q18 GPB/THB ❖ USD/THB closed at 32.46 in June 2018. Brexit • In 2Q18, average USD/THB was at 31.92 vote (-7.0% YoY, +1.2% QoQ) Relatively stable since Brexit vote ❖ EUR/THB closed at 37.90 in June 2018 • In 2Q18, average EUR/T
Slide 37: Thai Union's global footprint
Thai Union’s global footprint Slide 37 2Q18 Analyst Meeting
Slide 38: Total 1H18 sales by business
Total 1H18 sales: THB 63,839 mn Ambient seafood Frozen, chilled seafood and related PetCare, value-added and others Sales: THB 30,463 mn Sales: THB 24,846 mn Sales: THB 8,530 mn Tuna Tuna slices Shrimp and related 1 Lobster PetCare Marine ingredients Sardine & mackerel Ambient and pouch salmon Froze
Slide 39: Ambient seafood sales
Sales (THB million) Quantity (Tons) -1.6% YoY -3.1% YoY +16.0% QoQ +12.7% QoQ 120,000.00 119,000.00 118,000.00 117,000.00 20,000.00 19,000.00 16,631 16,111 15,250 16,363 116,000.00 115,000.00 114,000.00 113,000.00 112,000.00 111,000.00 110,000.00 109,000.00 108,000.00 107,000.00 106,000.00 105,000.0
Slide 40: Frozen and chilled seafood sales
Sales (THB million) Quantity (Tons) -2.6% YoY +3.2% YoY +15.6% QoQ 120,000.00 119,000.00 118,000.00 117,000.00 116,000.00 115,000.00 +17.5% QoQ 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 20,000.00 105,000.00 104,000.00 103,000.00 102,000.00 101
Slide 41: PetCare and value-added sales
Sales (THB million) Quantity (Tons) -1.2% YoY +2.6% YoY +9.1% QoQ +0.5% QoQ 50,000.00 49,000.00 6,000.00 36,884 38,454 39,862 37,638 37,842 48,000.00 47,000.00 4,502 4,580 4,548 4,081 4,450 46,000.00 45,000.00 44,000.00 43,000.00 5,000.00 42,000.00 41,000.00 40,000.00 12% 9% 8% 9% 39,000.00 38,000.0
Slide 42: Sales by region
32% Europe 38% United States 9% and Canada Thailand 21% Others (Asia, Australia, Middle East, Africa and South America)
Slide 43: US and Canada sales
Sales THB mn -4.0% YoY +9.4% QoQ 20,000 18,000 16,000 13,467 13,753 14,054 12,931 14,000 11,821 12,000 10,000 8,000 6,000 4,000 2,000 - 2Q17 3Q17 4Q17 1Q18 2Q18 ❖ North America businesses delivered 3.0% growth in USD-term. • Frozen business deliver growth, both volume and value, • Chicken of the Sea
Slide 44: Europe sales
Sales THB mn -9.0% YoY 20000 18000 +15.5% QoQ 16000 14000 11,949 11,183 10,879 12000 10,295 9,422 10000 8000 6000 4000 2000 0 2Q17 3Q17 4Q17 1Q18 2Q18 ❖ 2Q18 European sales down 9.0% YoY. ❖ Branded business price recovery affect volume sales. Profitability improved QoQ. ❖ Tough European salmon busin
Slide 45: Thailand sales
Sales THB mn 20000 18000 16000 14000 13.1% YoY 12000 10000 -7.8% QoQ 8000 6000 4,317 4000 2,803 3,342 3,439 3,169 2000 0 2Q17 3Q17 4Q17 1Q18 2Q18 ❖ 2Q18 Thailand sales up 13.1% YoY. ❖ Diversifying sales in home market to offset weaker export market as a result of intense competition ❖ Focus on produ
Slide 46: Emerging markets sales
Sales THB mn 20000 +8.5% YoY 18000 16000 14000 +42.6% QoQ 12000 10000 6,598 7,414 7,157 8000 5,932 6000 5,020 4000 2000 0 2Q17 3Q17 4Q17 1Q18 2Q18 ❖ 2017 Emerging markets sales up 8.5% YoY. ❖ Initiatives in China, both branded and OEM, are growing well. ❖ TU recently completed an acquisition of 45%
Slide 47: Business segment sales and gross profit
Sales Margin Gross profit Business segment THB million % THB million Ambient seafood • Tuna 16,363 17.6 2,880 • Sardine and mackerel • Ambient and pouch salmon Frozen, chilled seafood and related • Shrimp and related 1 • Lobster 13,324 8.2 1,094 • Frozen, chilled and smoked salmon • Other seafood2 P
Slide 48: Agenda: Business Outlook
Key Highlights Recent Developments 2Q18 Financial Results Business Outlook
Slide 49: Business outlook: repricing, cost program, deleveraging
Prices have begun successful re-adjustment for our Branded business in Europe and will further repricing will continue onto 3Q18 Spot prices and average inventory cost more balanced Positive outlook on shrimp cost and improving market dynamics in US Product innovations and Marine Ingredient business
Slide 50: 2018 guidance
Sales: Continued growth despite market challenges Gross profit margin: 14 – 15% SG&A to sales: 10.5% Effective interest rate: Slightly below 2017 Tax rate: 15% CAPEX: Approx. THB 4.8bn Dividend policy: At least 50% dividend payout ratio
Slide 51: Introducing Thammachart Seafood
Introducing 5 — Thammachart Seafood: ne thammachart the Premium : Score Seafood Company « € ; on P + ™ ® vi , > (a s lf Bs . a” .
Slide 52: Thammachart Seafood Retail overview
❖ Incorporated in July 2007 as Salmon Thammachart Seafood Retail Co., Ltd. ❖ Offers retailers in Thailand Others Fish Value- 1% professional management added service for seafood counters 22% with fresh, frozen or value- added products Shellfish ❖ Currently works with Central Smoked Salmon 4% 47% Foo
Slide 53: Retail and F&B operations
❖ Retail (supermarket) operations ❖ F&B (restaurant) operations) • Allows us to reach our customer as • Targeted in and around Bangkok before much as we can expanding out to main province of each part • 150+ stores nationwide of Thailand • Fresh, value-added & frozen including • 9 x The Dock the fir
Slide 54: Strong retail platform, Qfresh and F&B expansion
Working with Strong retail Launching F&B Qfresh brand platform brand format into new high-quality and network markets frozen products
Slide 55: Slide 55
Slide 56: Appendix
ALASKA SALMON” Appendix ie
Slide 57: Stock performance, major shareholders, dividend policy
Stock Performance at a Glance Major Shareholders Bloomberg/ Reuters TU TB/ TU.BK As of 29 June, 2018 Others Share price (3 August 2018) THB 17.50 51.3% Historical price 52-week high THB 20.20 Chansiri Family 52-week low THB 19.90 20.3% No. of paid up shares 4,771.8mn Par value THB 0.25 Mitsubishi Co
Slide 58: Consolidated income statement
Consolidated 2Q18/ 2Q18/ % % % (Unit: THB mn) 2Q18 2Q17** 1Q18 2Q17 1Q18 to sales to sales to sales Change Change Sales 34,137 100% 34,818 100% 29,703 100% -2.0% 14.9% Cost of sales (29,428) -86.2% (29,863) -85.8% (26,343) -88.7% -1.5% 11.7% Gross profit 4,709 13.8% 4,954 14.2% 3,360 11.3% -5.0% 40.
Slide 59: Balance sheet
% to total % to total (Unit: THB mn) 1H18 2017 Change assets assets Cash and cash equivalents* 972 0.7% 815 0.6% 19.3% Trade and other receivables - net 15,637 10.9% 16,344 11.2% -4.3% Inventories - net 39,708 27.7% 43,184 29.6% -8.1% Other current assets 2,040 1.4% 2,174 1.5% -6.2% Total current as
Slide 60: Cash flow statement
Consolidated (Unit: THB mn) 1H18 1H17 Change Profit before income tax 1,069 3,285 (2,216) Adjustments for depreciation & amortisation expenses 1,437 1,356 81 Other adjustments 1,653 1,152 502 Changes in operating assets and liabilities 3,556 (638) 4,194 Cash flows receipts from operating activities
Slide 61: Investor relations contact
thaiunion.com investor.thaiunion.com +66 2298 0024 [email protected] Line ID: @irthaiunion