Thai Union Group Public Company Limited · SET:TU

Thai Union Group Public — Q1 2018 Earnings Presentation

57 slides from Thai Union Group Public's earnings presentation, May 8, 2018

  1. Slide 1: 1Q18 Results Presentation

    1Q18 Results Presentation 8 May 2018 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 1Q18 Financial Results Business Outlook Page 3

  4. Slide 4: Agenda

    Agenda Key Highlights Recent Developments 1Q18 Financial Results Business Outlook Page 4

  5. Slide 5: CEO quote on cash flow and profitability

    “Despite the challenging environment, we are determined to sustain a cash flow generation and improve our operation profitability for Thai Union Group’s shareholders.” Thiraphong Chansiri President and Chief Executive Officer Page 5

  6. Slide 6: 1Q18: Strong Baht/high tuna cost accounted for weak profits

    1Q18: Strong Baht/high tuna cost accounted for weak profits  Declined sales. 1Q18 sales declined YoY YoY Chg % of sales driven partly by the Baht appreciation and declining tuna sales during the quarter.  High raw material inventory costs. Gross 29,703 Sales (THB mn) -5.5% profit margin remained u

  7. Slide 7: 1Q18 Net profit of THB 869mn, solid cashflow improve debt ratio

    1Q18 Net profit of THB 869mn, Solid cashflow improve debt ratio Financial Summary1 1Q18 Net Profit (THB million) down 39.3% YoY to Total Sales 1Q18 1Q17 29,703 31,427 -5.5% THB 869 million 1Q18 3,360 Gross Profit -26.2% Q1’12 1Q17 4,551 Share price movement Q1’11 20172 20182 Operating 1Q18 25 Cash (

  8. Slide 8: 1Q18: High priced inventory hurt operation performance

    1Q18: High priced inventory hurt operation performance Total sales (THB mn) GPM NPM 18.0% 60,000 16.0% 15.9% 14.5% 16.0% 14.1% 50,000 13.4% 13.4% 13.2% 14.0% 12.1% 11.3% 12.0% 40,000 35,050 34,401 33,715 34,818 35,185 35,105 31,210 31,427 29,703 10.0% 30,000 8.0% 20,000 4.4% 4.5% 4.6% 4.9% 6.0% 3.9%

  9. Slide 9: Agenda

    Agenda Key Highlights Recent Developments 1Q18 Financial Results Business Outlook Page 9

  10. Slide 10: Recent developments

    Recent developments Sustainability: Innovation: Mar 2018: Yellowfin Tuna Slices, the newest seafood innovation from Thai Union’s Global Innovation Incubator (Gii), has recently received the 2018 Seafood Excellence Award in the Best New Foodservice Product category at Boston’s Seafood Expo. Mar 2018:

  11. Slide 11: Recent developments

    Recent developments Awards Recognitions: Apr 2018: Strong recognition from Asian investment community, FinanceAsia’s Best Companies 2018 Thai Union has recently awarded in FinanceAsia’s Thailand Best z Companies 2018 for various categories: #1 Most committed to corporate governance #1 Best at corpor

  12. Slide 12: Joining the leading Russian seafood enterprise

    Joining the leading Russian seafood enterprise May 2018: Thai Union has continued its focus on #1 expansion with an agreement to acquire 45 percent of TUMD Luxembourg S.a.r.l (TUMD). TUMD wholly owns three Russian companies, collectively known as the DPR Group (DPR). DPR is a retail focused fish and

  13. Slide 13: Agenda

    Agenda Key Highlights Recent Developments 1Q18 Financial Results  TU’s Consolidated Results  Results by Business Unit Business Outlook Page 13

  14. Slide 14: Rough sea... standing fast... keep going.

    “Rough sea …” “… standing fast…” “…Keep going.” Joerg Ayrle Group Chief Financial Officer Page 14

  15. Slide 15: The key take away for 1Q18 results

    The key take away for 1Q18 results • Sales at THB 29.7bn and reported growth at -5.5%, mainly from Thai and US operations Top line challenged • At constant exchange rates, sales would have decreased by 2.8% vs. LY, while the volume sales seen a small decline of 1.6% YoY • Weak GP margin at 11.3% • A

  16. Slide 16: Tuna prices are increasingly volatile

    Tuna prices are increasingly volatile (USD/ton) 2,800 4Q17 3Q17 2,033 2,010 2,300 2,300 -22.5% 2Q17 1,763 2,100 1,980 2,000 1Q18 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 1,550 1,500 1,480 1,300 800 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct

  17. Slide 17: 1Q18 Sales under pressure

    1Q18 Sales under pressure Sales -5.5% YoY THB mn -15.4% QoQ  1Q18 sales declined by 5.5% YoY to THB 29,703mn. Excluding the impact of Thai Baht 34,818 35,185 35,105 appreciation, sales would also declined by 2.8% 31,427 29,703 YoY, driven by:  Ambient seafood sales saw decline from weak volume sal

  18. Slide 18: 1Q18 weak sales growth, compounded by FX impact

    1Q18 weak sales growth, compounded by FX impact Revenue growth component (THB million) -5.5% YoY 31,427 +17 -265 +53 -273 +93 0% -265 +20% -10% +13% -170 +185 -66 -270 -4% -24% -1,086 -3% -8% +10% -14% -2.8% YoY +322 29,703 Before currency impacts -10% +4% Tuna Sardine Salmon- 1Q17 Other Shrimp Lobs

  19. Slide 19: Strong growth in Thailand

    Strong growth in Thailand Sales Breakdown by Geographic  1Q18 Sales contribution in key markets 100% marginally shifted in favor of domestic Thai 13% 14% 13% 15% 13% market, due partly to the company was focusing 80% 7% 6% 6% 6% 5% 7% 8% 8% 10% 12% Others* more on selling product in domestic market

  20. Slide 20: Emerging markets: Thailand and other EMs

    Emerging markets: Thailand and other EMs (China and ME) Thailand sales THB mn +34.9% YoY  We are focusing on the market where we have less presence in the past, and now we can deliver strong growth in these emerging markets. 4,317 3,439  1Q18 Thailand sales was at THB 3.5bn, up by 3,342 2,549 2,80

  21. Slide 21: Some of our core businesses are suffering

    Some of our core businesses are suffering USD mn Chicken of the Sea Sales THB mn 110 3,800  Thai Baht revenue underperformed USD revenue 105 3,600 since 2Q17 due to strong Thai Baht appreciation 100 against US dollar 3,400 95  Gross profit margin is weakened, due mainly to 3,200 90 high priced inv

  22. Slide 22: Weak gross margin from high raw material inventory prices

    Weak gross margin from high raw material inventory prices 30.0% 28.0% Gross Profit -26.2% YoY 26.0%  1Q18 Gross profit of THB 3,360mn, down 26.2% THB mn -21.2 QoQ YoY, mainly due to abrupt decline in raw material 24.0% prices and high priced inventory. The gross 22.0% profit was also affected by st

  23. Slide 23: Baht strength to Dollar caused us around THB 500mn

    Baht strength to Dollar caused us around THB 500mn in 1Q18 Thai entities COGS related to exports  1Q18 average Thai Baht has appreciated against USD mn US dollar by 10.2%, which shown relatively more depreciation compared to the key competing 170 160 countries like Vietnam and Indonesia, where thei

  24. Slide 24: Operating profit: Strong cost control continued

    Operating profit: Strong cost control continued 20.0% Operating Profit 18.0% -97.1% YoY THB mn 16.0% -97.3% QoQ 14.0%  Despite a strong cost control, 1Q18 Operating 12.0% profit was at THB 25mn, driven by weak profitability from rising raw material prices. 1,627 10.0% Adjusted for FX impact, Operat

  25. Slide 25: Change in accounting policy and presentation

    Change in accounting policy and presentation The effects of change in accounting policy and reclassification as at 31 December 2017 are disclosed as follows:  The Group has changed the accounting policy regarding the As previously Adjustment Restated recognition of certain reported (Million (Millio

  26. Slide 26: EBITDA supported by FX management and Equity Income

    EBITDA supported by FX management and Equity Income 28.0% EBITDA -24.6% YoY THB mn -18.2% QoQ 23.0%  Despite a weak operating profit, TU reported 1Q18 EBITDA of THB 2,159mn. The increase was 18.0% driven mostly by prudent FX management and 2,863 2,874 2,990 income contribution from associates, main

  27. Slide 27: 1Q18 net profit supported by non-operating items

    1Q18 net profit supported by non-operating items 14.0% Net Profit -39.3% YoY THB mn 12.0% -39.7% QoQ  Despite a very challenging operating 10.0% environment, TU reported 1Q18 net profit of THB 8.0% 869mn, supported 1,737  The net profit was supported by: 1,432 1,411 1,440 6.0%  Increased other in

  28. Slide 28: Normalized net profit was at THB690mn

    Normalized net profit was at THB690mn 20.0% Normalized 18.0% Net Profit -35.5% YoY THB mn 16.0%  Excluding the one-off quarter-end items, 1Q18 -49.8% QoQ 14.0% normalized net profit was at THB 690mn, 12.0% representing 35.5% decline YoY 10.0%  One-off positive items during 1Q18 of THB 179mn 1,590

  29. Slide 29: EPS: Facing operational headwinds

    EPS: Facing operational headwinds EPS* -39.3% YoY THB -39.7% QoQ  1Q18 EPS was at THB 0.18. Challenging operational headwinds was offset by supports from non-operating items 0.37 0.30 0.29 0.30 0.18 1Q17 2Q17 3Q17 4Q17 1Q18 1.10 1.11 1.10 -39.3% YoY 0.30 0.18 2014 2015 2016 1Q17 1Q18 Remark: *EPS i

  30. Slide 30: 1Q18: First quarter remains seasonally strong

    1Q18: First quarter remains seasonally strong Red Lobster has contributed THB 266mn to the net profits THB mn 1Q18 4Q17 3Q17 2Q17 1Q17  Red Lobster is a strong contributor to TU’s 1Q18 profits, adding THB 266mn to TU’s net Share of profits or was 44.1% net profit accretive profit 137 -317 -33 -49 2

  31. Slide 31: 1Q18 Strong cashflow despite weak profitability

    1Q18 Strong cashflow despite weak profitability Quarterly Free Cash Flow THB mn  Despite rising raw material prices, 2017 Free cash flow (FCF) remain positive at THB 1,369mn, due 1,751 mainly to profitable operation, destocking of 1,369 high-priced inventory and prudent capex 1,049 spending 280 -14

  32. Slide 32: Majority THB funding, reducing currency risk

    Majority THB funding, reducing risk associated to currency volatility Interest-bearing debts of THB 65,715mn By Currency By Maturity EUR 1.0% 1.7% USD Short-term Loan 23% 23% 0.9% Current 2% 2%2% Portion 2019 of Long- term Debt & finance 2020 THB 98.1% 98.3% lease 2022 2% onwards Long-term 2021 Debt

  33. Slide 33: 1Q18: Strong cashflow generation prompted debt repayment

    1Q18: Strong cashflow generation prompted debt repayment Unit: THB mn ND/E 1.38x Income tax paid and other investing & financing ND/E 1.35x Free Cash Flow** THB 1,369 mn activities Kd = 3.21% Kd = 3.04% 66,419 +367 +79 65,173 +1,233 +70 -393 +600 -2,159 +115 -1,159 EBITDA Change in Change in Other n

  34. Slide 34: Improving D/E ratios; NWC turnover affected by lower revenue

    Improving D/E ratios; NWC turnover affected by lower revenue ROE1 INV Days Debt to EBITDA 143 15.6% 7.61 13.2% 12.8% 132 13.0% 6.37 125 5.66 5.70 5.64 122 7.8% 119 39,130 40,418 42,155 43,184 40,691 1Q17 2Q17 3Q17 4Q17 1Q18 1Q17 2Q17 3Q17 4Q17 1Q18 1Q17 2Q17 3Q17 4Q17 1Q18 INV (THB mn) INV Day ROCE2

  35. Slide 35: US Civil case progress and settlement

    US Civil case progress and settlement • Tri-Union Seafoods LLC (Tri-Union) and Thai Union Group continue to fully support DOJ’s and their investigation and still maintained conditional leniency with respect to the Investigation under the DOJ’s Corporate Leniency Program. Provided we continue to full

  36. Slide 36: Agenda

    Agenda Key Highlights Recent Developments 1Q18 Financial Results  TU’s Consolidated Results  Results by Business Unit Business Outlook Page 36

  37. Slide 37: Key operating impact: Key raw material prices declined YoY

    Key operating impact: Key raw material prices declined YoY Raw material prices Declining, but picking up over last month  Tuna price at USD 1,800/ton in April 2018. 1Q18 average price was USD 1,577/ton (-3.5% YoY, -22.5% QoQ)  Shrimp price at THB 160/kg in April 2018. 1Q18 average price was THB 18

  38. Slide 38: Key operating impact: Exchange rate

    Key operating impact: Exchange rate USD/THB EUR/THB Continue depreciation from 2017  USD/THB closed at 31.31 in April 2018. In 1Q18, average Brexit vote USD/THB was at 31.54 (-10.2% YoY, -4.3% QoQ)  EUR/THB closed at 38.45 in April 2018. In 1Q18, average Almost stable since Brexit vote EUR/THB was

  39. Slide 39: Thai Union's global footprint

    Thai Union’s global footprint Page 39

  40. Slide 40: 3 strategic business segments

    3 strategic business segments Total 1Q18 sales: THB 29,703 mn Frozen, chilled seafood PetCare, value added and Ambient seafood Sales: THB 14,100 mn and related others Sales: THB 11,522 mn Sales: THB 4,080 mn Shrimp & related Tuna business PetCare business1 Ambient & Pouch Frozen, chilled & Value-add

  41. Slide 41: Ambient Seafood: Challenging operating environment

    Ambient Seafood Challenging operating environment Sales (THB million) Quantity (Tons) -1.7% YoY -6.2% YoY -7.5% QoQ -7.6% QoQ 20,000.00 120,000.00 119,000.00 16,631 16,111 15,250 118,000.00 117,000.00 88,822 96,849 93,883 90,158 83,314 116,000.00 115,000.00 114,000.00 19,000.00 113,000.00 112,000.00

  42. Slide 42: Frozen, chilled seafood and related

    Frozen, chilled seafood and related Currency appreciation hurt competency Sales (THB million) Quantity (Tons) -8.8% YoY +1.7% YoY -24.7% QoQ -14.8% QoQ 20,000.00 90,000.00 89,000.00 88,000.00 19,000.00 87,000.00 86,000.00 85,000.00 84,000.00 14,494 15,307 83,000.00 82,000.00 61,185 66,203 63,045 18,

  43. Slide 43: PetCare, value-added and others

    PetCare, value-added and others PetCare profitability under pressure Sales (THB Million) Quantity (Tons) -8.2% YoY +4.8% YoY -10.3% QoQ -5.6% QoQ 6,000.00 50,000.00 49,000.00 48,000.00 47,000.00 39,862 37,638 4,580 4,548 35,900 36,884 38,454 46,000.00 5,000.00 4,444 4,502 4,081 Brand 45,000.00 44,00

  44. Slide 44: Global Presence

    Global Presence 40% 32% U.S. And Europe Canada 12% Thailand 16% Others Page 44

  45. Slide 45: US & Canada: Weakened Thai Baht sales driven by currency

    US & Canada: Weakened Thai Baht sales driven by currency Sales:THB -10.4% YoY 20,000 -15.9% QoQ 18,000 16,000 13,190 13,467 13,753 14,054 11,821 14,000 12,000 10,000 8,000 6,000 4,000 2,000 - 1Q17 2Q17 3Q17 4Q17 1Q18  1Q18 US and Canada sales was at THB11.8bn, down by 10.4% YoY. While sales in US d

  46. Slide 46: Europe: Showing some bright spots

    Europe: Showing some bright spots Sales:THB -3.4% YoY 20000.00 -8.5% QoQ 18000.00 16000.00 14000.00 11,949 11,183 12000.00 9,758 10,295 10000.00 9,422 8000.00 6000.00 4000.00 2000.00 0.00 1Q17 2Q17 3Q17 4Q17 1Q18  1Q18 European sales was at THB 9.4bn, down by 3.4% YoY.  While the volume sales has

  47. Slide 47: Thailand: Focusing inward

    Thailand: Focusing inward Sales:THB +34.9% YoY 10000.00 9000.00 +2.9% QoQ 8000.00 7000.00 6000.00 5000.00 4,317 4000.00 3,342 3,439 3000.00 2,549 2,803 2000.00 1000.00 0.00 1Q17 2Q17 3Q17 4Q17 1Q18  1Q18 Thailand sales was at THB 3.4bn, up by 34.9% YoY.  Thai Union is focusing more on selling prod

  48. Slide 48: EM and Rest of the world: New market penetration

    EM and Rest of the world: New market penetration Sales:THB -15.4% YoY 15000.00 -32.3% QoQ 13000.00 11000.00 9000.00 7,414 6,598 7000.00 5,931 5,932 5,020 5000.00 3000.00 1000.00 -1000.00 1Q17 2Q17 3Q17 4Q17 1Q18  2017 Emerging markets sales of THB 5.0bn, down 15.4% YoY.  The weakness was driven ma

  49. Slide 49: 1Q18 Segment Profitability

    1Q18 Segment Profitability Sales Margin Gross Profit New segment (THB million) (%) (THB million) Ambient seafood 14,100 14.0% 1,970 *Tuna business *Sardine & Mackerel *Ambient & Pouch Salmon Gross Profit Frozen, chilled seafood and 11,522 6.4% 737 THB 3,360 million related *Shrimp & related business

  50. Slide 50: Agenda

    Agenda Key Highlights Recent Developments 1Q18 Financial Results Business Outlook Page 50

  51. Slide 51: Business Outlook: moderate positive signals in 2018

    Business Outlook: There are moderate positive signals in 2018 Price increases were negotiated successfully for our Branded Spot prices and average business in Europe and in the inventory cost more balanced US and will become effective starting Q218 Positive outlook on shrimp cost Product innovations

  52. Slide 52: Appendix

    ia Thai Page 8? ® Union

  53. Slide 53: Share Capital Information

    Share Capital Information Stock Information Major Shareholders Bloomberg/ Reuters TU TB/ TU.BK As of 30 March 2018 Share price (4 May 2018) : THB 18.30 Historical price : Chansiri Family 52-week high THB 22.70 20.4% 52-week low THB 17.40 No. of paid up shares : 4,771.8mn Niruttinanon Family 7.2% Par

  54. Slide 54: 1Q18 Income Statement

    1Q18 Income Statement Consolidated 1Q18/ 1Q18/ % % % (Unit: THB mn) 1Q18 1Q17* 4Q17* 1Q17 4Q17 to sales to sales to sales Change Change Sales 29,703 100% 31,427 100% 35,105 100% -5.5% -15.4% Cost of sales (26,343) -88.7% (26,876) -85.5% (30,842) -87.9% -2.0% -14.6% Gross profit 3,360 11.3% 4,551 14.

  55. Slide 55: Statement of Financial Position as of 31 March 2018

    Statement of Financial Position as of 31 March 2018 % to total % to total (Unit: THB mn) 1Q18 2017 Change assets assets Cash and cash equivalents* 542 0.4% 815 0.6% -33.4% Trade and other receivables - net 13,961 9.8% 16,344 11.2% -14.6% Inventories - net 40,691 28.6% 43,184 29.6% -5.8% Other curren

  56. Slide 56: 1Q18 Statement of Cash Flow

    1Q18 Statement of Cash Flow Consolidated (Unit: THB mn) 1Q18 1Q17 Change Profit before income tax 954 1,722 (768) Adjustments for depreciation & amortisation expenses 709 679 30 Other adjustments (96) (384) 287 Changes in operating assets and liabilities 1,035 (2,862) 3,897 Cash flows receipts from

  57. Slide 57: Corporate website and IR contact

    Corporate website: www.thaiunion.com IR website: http://www.thaiuniongroup.com/en/investor.ashx E-mail: [email protected] Tel:57+66 2298 0024 Page

Thai Union Group Public Company — Q1 2018 Earnings Presentation on 6ix